Editors Note – This is the third article in this series. The main concept to remember as you move through it is that each of these articles focuses on one “mega trend”. These trends were already in motion before CoVid appeared, what has now happened is due to CoVid they have been accelerated and much of what was going to take about a decade to play out, will now most likely play out in 2-3 years.
For more on this please read Part One of this series if you have not done so yet as it will provide context which I have chosen to not repeat in this article. The entire series as it is released can be found here. Also as you will soon see each of these trends are interrelated and each magnifies the effects of the others.
Today we continue in our examination of 8 mega trends of flux that will drastically impact the US and in many ways the global economy. Last time we looked at K-12 education and what can only be called a “homeschool revolution”, today we turn to post secondary education. While “post secondary” is generally accepted to be all forms of education after high school, today for this discussion we are looking at primarily university education, as in “going off to college”. As I keep saying these are all mega trends but when it comes to post secondary education it has four massive sub trends driving it.
Trend One – The Value of a Degree is in Terminal Decline
All the way back in 2005 I was a CMO of a technical recruiting firm. I met a man at a Chamber of Commerce committee meeting. He managed a company of CSRs, basically phone support people. To do the job such people need a good speaking voice, the ability to read a script and basic computer skills. You can literally train one to competence in less than a week. This was below our usual level of placement but given the volume he was talking about I figured may be we could help him. Then he dropped the final requirement on me, a 4 year degree.
What? Why? His response was, “There are so many people with degrees right now, we may as well make that part of the requirement. At least we know that person can start something and complete it.” So 15 years ago that is what 20-100K in student debt got you, and it only gets worse. I should note that about 10 years prior to this time I worked with a company that provided the same type of service. They had part time high school kids who did the same job and did very well at it.
There is an old story that goes something like this. A very rich man found a technology that would let him sleep for 100 years and not age a day. Not satisfied with his current wealth he put all his money into gold, paid 100 years of storage for a vault and went to sleep.
When he woke up he saw gold all over the place and thought his gold had been stolen and given to people. He learned all his gold was still safe in the vault. However, a cosmic event had turned almost all exposed metal to gold, his gold was secure, but it was also now worthless.
Lot’s of lessons there but the one most relevant to our subject is, “something is valuable because it is rare“. Not so long ago from the founding of our nation up till the 1920s college was mostly free. Even after that it was free or very low cost for most who attended and in many cases this was true up to as late as the 1970s. Then it all changed! What caused the shift was a slogan, “every child should go to college”, the problem is this slogan is a deadly economic trifecta. This deadly trifecta is simple, it sounds good, people want to believe it and it isn’t true.
This all went off like a rocket by the 1980s and anyone even with crappy grades could get a loan. At least at the time, college admissions were still competitive. As I was in High School during this period and considered it as an option I remember it well. By 2008 my son was getting ready to go to college so I helped him apply. Let me just say, from what I saw, “they would let anyone in” was an understatement.
So, just how was college so cheap or free until modern times? It was funded with some public money but most of the ongoing expenses were funded by successful alumni in the form of endowments and scholarships.
This kept student head count lower (you had to be good to get in) and the costs of tuition and the spending by universities in check. Successful people know when you are wasting their money. Once student loans became the answer and the government provided a massive free marketing campaign everything went down hill fast. Universities quickly grew in number, size, staff head count and in every other way possible. And once they realized no matter how high tuition went, kids could still borrow the money, they simply kept raising the cost.
What we have now is a situation were about 75% of students go on to college in some form and about 54% actually graduate. There is a glut of degrees and many are meaningless. Don’t get me wrong there are still great career paths that include a degree but millions of people now have degrees they paid 50-150 thousand or more for, that are fundamentally worthless.
Hence while many employers “require a degree”, most in practice see very little value in them as anything other than a formality. All you need to look at is one statistic for this to become abundantly obvious. Currently, about 70% of all graduates say they either do not use their degree or cannot find employment in their field of study. This trend is an old one, it just keeps getting worse. Many cherry pick statistics about earnings to deny it, but one must be committed to total denial to dispute this trend.
In the end, there is only one logical conclusion and you won’t like it. However, that won’t change the fact that it is true. The cost of a degree today is exponentially higher than it was 50 years ago and its real value to employers is a fraction of what it once was.
And while the cost of a degree has grown exponentially as its value has fallen, the number of people with degrees has also grown at an incredible rate. This can only happen in a market driven by government subsidy and unlimited, unchecked debt. The result is an illogical separation between the cost of a degree and the underlying value. If your head hurts right now as you attempt to deny this, our old friend cognitive dissonance has returned.
Bluntly, no amount of cherry picked statistics will ever make this go away.
Trend Two – College Enrollments are in a Terminal Decline
When we look at college enrollments over the last 10 years, the data is both clear and ugly. Now in an attempt at misdirection many are blaming big scary CoVid for this. Once again CoVid is accelerating this trend but it was already in motion. This article documents the fact that by December of 2019, before anyone knew what CoVid was, College Enrollments had Declined for Eight Consecutive Years. Any investor asked to put their money into a company or sector that had declined for 8 years in a row would give you a one word answer, “no”. They wouldn’t bother with an explanation, assuming that if you needed one, you’d not understand it anyway.
Source – https://educationdata.org/college-enrollment-statistics/
Once any sector goes into a multi year decline the writing is on the wall, it is all over but the crying. And why wouldn’t it be? The way we educate people at universities is honestly at this point centuries old. Yet almost every American has a tiny computer we call a phone in their pocket. That “phone” has more computing power than the entire bank of computers that put a man on the moon in 1969. While some degree paths really do still belong in a classic university setting, the reality is most do not.
The two big reasons we have continued to grow the university system are money and greed. This leads strait to what can only be described as a strategy of self preservation of an elite class of academics. This system, like all such systems exists mostly to perpetuate itself. To maintain a system in our modern economy growth is required, even being level won’t cut it. So growth at all costs became a manta.
“I say good chap, we’ve got to have a new sports stadium to compete for more students”. Welp, there goes 100 million dollars but hey its no big deal. New lecture hall, new this, new that, what ever we can come up with, let’s grow baby. Hey, why not a new entire “school of fill in the blank”? Of course all the staff and professors need a raise this year, better raise that tuition a bit. The money will never run out! Except is it starting to now.
For about 40 years now this was doable, just follow this formula…
- Lower admission standards and accept more students
- Raise tuition and housing costs and let students go into more debt to fund it
This is ending. Johnny is now getting out of high school and watching his degree holding older sibling schlep coffee or do some other menial job. He is watching his buddy’s big brother make 80K a year with a 6 month internship in welding or pipe fitting and saying, “no way dad, no way mom, no way I am borrowing 25K a year to do what big sis is doing, I am going to find something, anything else”.
You can deny it but it is an 8 year trend, 8 consecutive years! I challenge you to show me any sector in human history that declined for 5 consecutive years and come back, without a radical and indeed total transformation. Hell, I dare you to find one that did it after 3 years of decline let alone 8. Please consider that this downward trend occurred during a period of overall economic growth in the US. In fact, during one of the most sustained periods of growth ever. A sector that declines in the best of economies is frankly screwed in a recession.
To think CoVid and the associated panic from it won’t accelerate this existing terminal trend amounts to living in fantasy land. And trust me the universities know this and they accept it. They are all rapidly shifting models now, but it is going to be to little to late for many. Even those that succeed will have to reduce campus size, services, teacher head count, almost everything and above all tuition.
I know this one is really hard to accept, and you are reading some blog by a podcaster so it is easy to shirk off. Well, if you go back to August of 2019 before CoVid even existed some experts were already predicting 25% of all colleges failing in the next two decades. You may consider that extreme but I am telling you based on trends, it is a tremendous underestimate of immanent cascading failures.
Trend Three – Nano Degrees, Boot Camps, Vocational Internships, etc.
Bluntly, employers are tired of interviewing philosophy and gender studies majors for jobs that are in no way aided by these degrees. Think of every job you have applied for in the conventional sense. You get some largely bullshit description, a bunch of equally bullshit boiler plate crap then you get a list of bullet points.
Even once you get to the bullet points many are arbitrary or redundant. How about this one that you will find on almost every job posting? “A strong work ethic”. Really? No shit! Nice job Karen in human resources, well done! Does your wrist hurt yet from all that copy and pasting?
Eventually, some sub set of those bullet points are the things you are actually expected to do in that job. If you can prove that you can do those things you can almost always get the job. The entire rest of the description is simply designed to screen people out of the process. If you ignore it and simply know how to sell yourself, you can often get jobs you are technically “not qualified” for. I have for instance been hired twice into jobs that required an MBA. I don’t have an MBA. I will never have any sort of degree. Frankly I don’t have a single hour in college as a student and have no plans to change that.
Clearly my path is the exception but employers started asking questions. Such as…
“What if we could custom order entry level employees in this particular field? Like ordering parts for a computer where you get exactly what you want? If we could get people like that, what would they all be able to do”?
Then they skipped all the bullshit, made just the list of bullet points and were very specific as to the base skills of an ideal job candidate. By leaving Karen in HR out of the process they streamlined everything to just what they really wanted and needed. Then they swiftly realized that almost no existing applicants possessed all of it, no matter what degree they might possess.
They took this to educational partners and asked, “can you do this”? These educational partners responded with, “no courses in French Literature or Gender Fluidity”? The employers shot back with, “nope, just those hard skills on that list”. Many of these educational partners responded with, “how many of them do you want in the next 90 days to 6 months”? In some instances, it really has become the ability for an employer to pre order new employees with the exact skills they want them to have.
Some of these programs are now so interconnected with employer needs that you are pretty much guaranteed a job if you complete the program. Here is just one of many examples. Google has partnered with Udacity to create a program for Android Developers. They actually make the entire course free but charge 200 bucks a month for grading and project review. Google now gets 100% qualified candidates with no risk on hire. They know A% will still wash out but that percentage is far lower then a typical hire. B% will make good long term employees at that level or just barely above it, C% will become highly valued and D% will become rock stars in the company. Trust me, Google has actual numbers to replace those A-D values with. So when they change the course they can tell if it improves things fast. As soon as A% drops, B, C and D all go up by a known factors.
There is no case to be made that this program is not better for employers, but what about students? To answer that, let’s simply look at the Udacity program above. I can honestly take this course for free and everything I learn even if I don’t pay to be graded is valuable to me. Many entrepreneurs do well just developing for android and never take a job. If I do get the certification, well I am very likely to be hired by Google and if not by Google plenty of other companies hire developers all the time.
Once I am in the door with that base skill set my potential for learning and development, often fully employer funded, becomes almost unlimited. The cost? Well, if I plod though slowly over a full year paying the entire time it is a whopping 2,400 dollars. All from the comfort of my home. A young person can literally work minimum wage part time, live at home and still have a bit of “fuck around money” on this educational path. Their odds of employment are very high, their options as an entrepreneur are great and any contention to the contrary is beyond delusional. A simple look in this area reveals thousands of similar programs.
On top of it there are now programs like Discover Praxis which is a boot camp. While it is more expensive than the program we just covered it is technically free and you are guaranteed a job at the end of it if you complete it. The one year program is 6 months of boot camp learning, then 6 months of a guaranteed internship. The internship pays in a way that is at least equal to tuition, so you earn as much as you spend by the time you complete your program. And you don’t pay a dime until you are hired into that internship. Not only do you get trained for a career you get trained in how to market yourself to employers. Let me ask how just these two options compare to college for a large portion of students today? Again, there are hundreds of these options and more are being developed every day.
The lesson here is when any sector or industry goes into decline there is an opportunity for disruptors and innovators. This has always been the case but it has never collided with the technology we have today. Technology that enables such disruption, at so modest a cost, for so many people, regardless of their physical location.
Trend Four – Universities are Moving to Online Education as they See the Writing on the Wall
Remember when I said “The two big reasons we have continued to grow the university system are money and greed. This leads strait to what can only be described as a strategy of self preservation of an elite class of academics.” Large numbers of university staff, specifically professors are about to run smack into something called “The Iron Law of Bureaucracy“. This law is old but it was codified by a critical thinker named Jeffery Pournelle. He put it this way…
First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.
Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.
The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization.
Add to this, as I have previously explained that the primary goal of this system is self preservation by a class that considers themselves elite. Well many of the professors, including many with tenure are about to find out they are not actually in that “elite class”. Rather if you compared the modern college system to say the feudal system they were the cobblers, blacksmiths and coopers in the system. Some are even say in the merchant class, but none are nobles. Rather they are tools in a system and have been permitted to thrive in it as long as such is expedient to said system.
The relatively short term reality is that universities are about to see major down sizings. Just as in K-12 education we will see millions of people laid off and a lot of them won’t have much for job prospects. Many that do have prospects will soon find nothing that pays as well, is so rife with benefits and is such a sheltered form of employment. A lot of these people are about to get a taste of the real world they have supposedly been preparing students for and find out that they have no ability to deal with it themselves. I know it is tempting to feel a bit snarky thinking of these self important people running into reality. Yet, don’t be too cocky, it is going to cause a lot of flux for our entire economy as you are about to see.
In the end it is simple, less people are going to college, a wave of new options are being created and the real value of a degree is at an all time low. Colleges must adapt and when they do the administrators and such will protect themselves at the expense of the teachers. It is coming, nothing can stop it and the fact that Harvard has stated all classes in 2020 will be online is all the confirmation that this trend is real that anyone should need to see.
The Cascade Effect
As before, this ties back to mega trend one which is real estate. Have you ever been driving cross country and noticed a small town on your map or GPS and figured, “okay we can stop there”? Driven into this town and thought, “Wow, this place ain’t so small. They even have an Olive Garden and a Costco”. Then sort of wondered what does this place have going on, why is it so developed? Then right as you pass though the center there it is, a sizable university. The “University of Somewhere Land”!
Do you realize there are thousands of these types of universities all over our nation? That if that school goes under so does the entire town? That even if that school cuts back student head count by say 50% and shuts a few buildings it can literally collapse most of the town? Any idea how many local folks own real estate they rent to students? How many businesses can’t survive without students brought in fresh each cycle?
Let me put it this way, do you remember the fall out as a few military bases closed in the 80s and 90s? How little towns were devastated by it? Each of these universities has the economic impact of a small military installation in many of these communities. Instead of half a dozen closures, what do hundreds look like at a national scale?
Now think about this question. How many professors work at that college simply because it was a school that hired them? Honestly, many have no deep roots in these communities. They live in some pretty nice houses which if laid off they cannot afford. They can talk about the “quaint little town” all they like but many of them reside in those small towns simply because it is where their jobs is. In the end if such a school folds in, even if it survives by shifting a lot of what it does to the internet, that town is toast.
Ask yourself, what happens when this occurs right in the middle of a generalized real estate crash, one that we have established is already starting?
Now add tens of thousands of small businesses in all these towns going under, those people leaving or families “doubling up” to compensate. I want to be clear, the big schools are not going vanish. They will survive with smaller physical campuses. As this happens the big fish are going to start killing off the little fish.
If you go back and read part two on K-12 education and think about this sector it all becomes clear really fast. K-12 is about to be radically down sized and k12 is tax payer funded and government mandated. Conversely, college is expensive and no one makes you go. The prospects of finding a job that matches many degrees post graduation are low. The debt load students are willing to shoulder has reached a ceiling. College professors are paid more then K-12 teachers, yet many are just as ill prepared for life outside the education sector.
Finally, you must ask yourself do we need over 4,200 Universities if even 25% of all students go to a mostly online model? Do we really? Do you realize that averages out to 84 universities per state? What possible need is there for that quantity of schools in a world of online learning, automation and limitless alternatives for post secondary education?
Schools will start to cut tuition, then schools with bigger names and more prestige will as well. They will come down to a little less than some of the mid tier schools, increase class sizes, etc. At some point the stigma of for profit online options has to start to fade. If you can get a Harvard Degree online why not a tech degree from a school established by professionals that have actually built and deployed technology? Why wouldn’t better named schools increase student head count to almost unlimited levels if they can scale up with technology? Where do those new students come from when total enrollments are down? They can only be “stolen” from the “lesser” schools, there is no other source for more students at this point.
In the end the cost to deliver educational services online is the fraction of doing it in person. I am not saying all conventional college campuses will go away. However, some will and many others will downsize their physical campuses. Even 10% would be an economic disaster and it will be a lot more than that. Again like everything in this series this has been coming for a long time but now it is all being accelerated.
Keep in mind there are about to be millions of new homeschoolers. That trend leads millions of high school graduates who are very comfortable with self directed education. Again it is all a cascade effect that is imminent and each mega trend feeds off the others.
With less jobs, young and more independent minded young adults will be less willing to spend huge amounts of money in the form of debt. This will force schools to automate and reduce staff head counts. Housing gets wrecked in college towns, housing gets wrecked from the general migration out of the cities and kids start working more on hard skills for employment vs. a “college experience”. Teachers get laid off and compete for a declining number of teaching jobs. Then they plod into the general employment market already full of plenty of folks with more real world experience than they have.
The good news is this is a cleansing that we need to have. The entire system has become a debt backed ponzi scheme. Parents are cosigning loans and spending massive amounts of money as well. They send energetic young kids off to school and a year later their children come home and lecture the parents about their “privilege”. We desperately need more trades people. We desperately need to shrink this massively bloated corpse of modern education, but it is going to hurt as we process though it. Thanks to CoVid it is being accelerated and it is going to collide head on with the other trends all at the same time.
Trust me, you won’t recognize modern post secondary education by 2025 and the fallout will be massive. That doesn’t mean it won’t create a lot of opportunity as well, but that is for our next series of articles.
Once again CoVid is killing the dying and I don’t mean people.