The financial reality of the education industry

disrupting education for the better
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Higher education is not just about producing valuable workers, but about educating people to become thinking, lifelong learners who contribute in many positive ways to society, be that local or global.

The articleThe disruptive business model for higher education is open sourceis of the mentality that higher education should be funded by companies in return for colleges and universities preparing students (first-and-foremost) for their workforce. Here is my very brief, potentially biased, high level summary of the article:

Higher education should be funded by companies in return for colleges and universities funneling their best and brightest into those companies. Put simply: higher education is about producing valuable workers.

I always struggle with pundits who come up with solutions or the right way to do things when they don't have the required experience in education. Further, education is not just students in seats, but a broad-reaching social agenda. There are massive challenges surrounding the education of a populus, and higher education is no exception. To put these challenges in context, and to help frame why I think the article's proposed 'disruptive model' falls short of the mark, I'm going to do my best to help frame the scale of higher education in terms of dollars (using examples from the USA), and why an 'open disruption' will have to be much broader in scope before it plays a transformative role in education in the US and world today.

Duke University: $10B/year

One example of why strict corporate funding of higher education is, without a doubt, a go-nowhere proposition—higher education is an industry unto itself, and a substantial one at that. Looking at the 2011-2012 annual report from Duke's development office, $350 million dollars were brought in through charitable donations. Corporations represented 13% of that number, whereas 26% came from individuals (alumni, parents, and other individuals). Put another way, corporate giving—just at Duke University—would need to double before it would match donations from individuals. Of that giving, $93 million was budgeted for need-based aid for students to offset the high cost of tuition at the university.

To put these large numbers in context, Duke University is roughly a $10 billion ($10,000,000,000) per year enterprise. Red Hat, one of the most successful publicly-traded open source companies in the world, is a $1B/year company—and only recently. So, Duke University is, as a business, substantially larger than Red Hat. Google is (if I read things correctly) roughly a $50B/year enterprise.

How many Duke Universities could Google support? One? For how long? As long as people are willing to click on ads? Duke was founded in 1838 and Google in 1998: which will last longer? How many schools could Red Hat support? Zero? Or, perhaps Red Hat could support a smaller college. However, small colleges are typically multi-million dollar businesses unto themselves with annual operating budgets in the realm of $70M to $120M or more. Put simply, these institutions have operating budgets that far outstrip their income from external giving.

Now, should their budgets be that big? And, could we serve more with the resources we have? Almost certainly. There is no question that the model is ready for disruption. But, that disruption needs to serve more and do better than we do now, not the alternative. I don't see higher education as an industry funnel for the best and brightest as a 'serve more, better' proposition in any way, shape, or form. 

Education: $1T/year industry

If the Education Industry Association is to be believed, we should pay attention to this quote:

Education is rapidly becoming a $1 trillion industry, representing 10% of America's GNP and second in size only to the health care industry. Federal and State expenditures on education exceed $750 billion. Education companies, with over $80 billion in annual revenues, already constitute a large sector in the education arena.

Although I have no idea if this number is accurate, other numbers I found were in the range of $650B to $800B/year, implying that education, as an industry, is massive. It is more massive than the internet/technology sector, and suggesting that technology companies (or, any other industry in general) might 'float' education as a financial enterprise because higher education improves its 'talent identification' skill is, at best, lacking in consideration.

How FOSS and MOOCs can disrupt

I believe FOSS (Free and Open Source Software) and open licensing can disrupt traditional industries. I agree with K. Beck's comment on the aforementioned article. I don't believe MOOCs (Massive Open Online Courses) are impressive as they exist today. They're fancy wrappers around textbooks, with automated grading of easily graded content (simple arithmetic and code), and poorly support rich interactions between individuals (as well as other known high-impact aspects of deep and meaningful learning). Put simply, content does not equal learning, and MOOCs simply are not there yet.

Given that we struggle, as educators, to provide support for excellent, authentic learning in traditional contexts (i.e. classroom), the FOSS/libre world has a long way to go to making it happen online. However, the fact that people are collaborating, and exploring, and asking questions about how we can provide more, high quality education to more people around the world is critical. So please, do not take my (brief and extremely condensed) concerns regarding MOOCs as a condemnation of online education or the notion of 'excellent education for all' as an attack on the spirit of the spirit of global, equitable education regardless of place or socioeconomic status.

In fact, the real question is: How do you make a free and open transformation of education go geometric in its scale and impact for linear (or less) cost? If we're going to "educate the world," then we need to figure out how to reach more people, more rapidly than we do now, with fewer resources, and with greater impact in terms of the intellectual and emotional growth of the individual.

All of that said, I do not, for one moment, believe that transforming higher education into a recruiting funnel, funded by corporations, will work. It won't work financially, and more importantly, it completely subverts the purpose of education. It is, I think, an incredibly discriminatory model, and fails to address the spirit of openness and community that is so critical in the open source way. I could say more regarding my personal thoughts about the role of education (primary, secondary, and tertiary), but instead I'll close with UNESCO's definition of the role of education:

Education should be a means to empower children and adults alike to become active participants in the transformation of their societies. Learning should also focus on the values, attitudes and behaviors which enable individuals to learn to live together in a world characterized by diversity and pluralism.

For an open-source disruption of education to be truly powerful and transformative in the world today, it must:

  1. Bring more education to more people
  2. Provide a truly transformative educational experiences for learners

Education is about empowering individuals to become transformational members of a society. It is not strictly about stuffing content into brains and recruiting those brains to technology startups. I agree that we have a system rife with inequity, but restricting higher education to be a model for vocational training for any industry is short-sited and ill-considered, at best.

MOOCs and the 1%

Here is the true challenge for MOOCs. Actually, this is a US-centric view of the challenge for MOOCs; the situation on a global scale is even more challenging, because such a massive concentration of wealth exists in the US compared to many other parts of the world. Further, it is important to remember that the largest and most visible MOOCs are not a grassroots effort put forward by the people and for the people. They are business ventures put forward or otherwise backed by some of the richest educational and venture institutions in the world. Personally, I don't believe that MOOCs (and the movement they're part of) are strictly philanthropic venctures.

I'd like to pull an extended quote from Gianpiero Petriglieri's article Let Them Eat MOOCs, posted October 9 on the Harvard Business Rreview Blog Network. This article is full of links that bring together many other articles and posts on the subject of MOOCs, and I recommend reading all of them if you're going to be an informed participant in the discussion of massively open educational opportunities.

All educational institutions have a dual social function: to develop individuals and to develop culture. Sometimes development involves affirmation. Sometimes it involves questioning and reform.

All education therefore involves both training and socialization. The knowledge one acquires is not just concepts and skills to become a good employee but also values and mores to become a good citizen—of a society or an enterprise.

This is as true of the liberal arts college as it is of the professional school, corporate university, or online diploma factory.

My question about what would it take to transform higher education and make the ideals of open source go geometric in their adoption—to truly, massively scale in the same way that a popular app or video might spread virally through the Internet's population—is not my own question. It is a question that a VP at Red Hat asked me once, as part of an ongoing conversation about how we can bring significantly more people to open source and open educational endeavors. I think that question of scale—of reaching everyone—is insanely challenging, and I don't think we're approaching the problem the right way... yet.

I do know that these large educational endeavors, and bringing the Open Source Way into the educational realm, will mean disruption for our current models. I don't know what those disruptions will look like... but if I'm going to support it, it will need to be education, not colonialization. It will need to be inclusive, not exclusive. It will need to support currently disenfranchised learners, not further exclude the poor and the hungry (actual, not metaphorical) from opportunity. 

Anything that furthers the economic and educational disparities we already have is not viable. We can do better. I just wish I knew what it was.

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Gerard Lally's picture

There are massive challenges surrounding the education of a populus [sic] ...

Yes, there obviously are.

You "struggle" with "pundits who ... don't have the required experience in education," do you? Poor you.

Don't worry; we have our fair share of pompous, smug and self-satisfied educators in Ireland as well. Thank God we are intelligent enough to make it in life *despite* these self-important windbags.

jadudm's picture
Open Minded

I thank you for your comment, and I'm sorry you feel that way.

When politicians spin educational policy without experience actually working with students, we tend to see radical departures from processes and practices that work. For example, we know (from years and years of research and experience) that excessive testing does not help young children develop. Yet, when a child comes to school hungry, and unable to focus and learn effectively, we still claim that the teachers should "be held accountable." Cutting one set of social programmes and expecting more from another has never been an equation that makes sense to me.

But, this is the nature of policy and politics. I suppose that's what I was trying to say, and said poorly: we cannot dictate education through policy and politics. Politicians pandering to corporate interests (in hopes of being reelected) and talking heads on TV are not the people you want driving the agenda for the education of a national or global populace. For example, I've never understood why we allow politicians to drive the process in education, but we don't let them dictate how to carry out open heart surgery? Educating children (or adults, for that matter) effectively is not any easier.

A quick look around the web suggests that Ireland is having many of the same debates that the rest of the world is: an understaffed educational system, struggles with inequity (and education that serves those who have better than those who have not), and so on. It's a hard problem, and I stand by my comment that I don't like it when someone waives their hand at it and claims the problem to be simple.

Unidentified's picture

Let's take our rosy glasses off for just a moment when assuming 'open disruption's' future is best managed by Universities being funded primarily by private corporations... That's a very Republican notion of yours and frankly, no one wants Halliburton, the Eron's of America, foreign corporations, or any other company with an agenda dictating curriculum, and who's allowed funding and who pads the Big Tens school boards. With that there's no stopping religions from eliminating science programs, etc. You get the picture.

There's a reason the government & state agencies regulate and manage public institutions. There's a reason we have donors and alumni that compliment but do not control our Higher Ed outcomes.

If you narrow 'open disruption' to be shadowed by corporate greed and insulance, --well that ensures you no longer have 'open disrution' or bleeding edge research.

jadudm's picture
Open Minded

If I understand your comment correctly, I think we're fundamentally in agreement.

Atul Mittal's picture

The worst thing of our present education system is that it is focused more on the financial growth rather than the conceptual and skill growth of the candidates. In India, many students even after completing their graduation do not posses enough skills to find a suitable job. This is the basic reason for unemployment in the country. We should try to improve the level of the education system to make it more knowledge oriented. We at Online Exams India, trying our best to improve the quality of online education in India.

Kevin Donnelly's picture

This is an interesting piece, and I agree that education should not be just training for a job. However, I'm afraid I would be more convinced by the "rounded education" argument if it weren't for the fact that here in the UK there is a lack of clarity over just what students are getting for the large fees they now have to pay. Some reports suggest that for some courses such as history a student can have as little as 5 hours a week of lecture/contact time. And I suspect that to many university staff, teaching students is less "crucial" than getting their research done so that they can continue their careers. To me, this suggests that MOOCs may actually be quite competitive with some courses, and are likely to be more easily amended and extended. As for the "wrapper" notion, I think this ignores the non-specific learning that students can get from reading other students' queries and answers in the forums or wikis that usually accompany MOOCs.

jadudm's picture
Open Minded

From a faculty perspective, you're (sadly) right: scholarship, at many institutions, is the measure of success. If your teaching is "good enough," you'll make it. (In fact, at some larger institutions, you're discouraged from doing too well in your teaching, as some members of the evaluation committee will see it as an indicator that you're not serious about your research; I've heard this first-hand from colleagues.) At smaller institutions (in the US, anyway), it is not uncommon for them to say that excellence in teaching is the sine qua non element of advancement, meaning "it is essential." So, it does vary from institution to institution, and what that institution values.

Boyer presented an interesting piece in the early '90's titled Scholarship Reconsidered, wherein he suggested a new model for considering and evaluating scholarship in the academy. From some poking around, it seems like few institutions have truly embraced his model.

I'm not yet convinced we should all flee to MOOCs and online forums, as I don't think they're actually a substitute for good, interactive learning in a dynamic classroom. But, in the absence of that kind of interaction and engagement, they might be a better option. For example, if you're sitting in a lecture hall with 150 other people, and the majority of your marks come from exams you sit at the end of the term... well, yes. It is possible you could do just as well online.

Samantha's picture

I'm a product of US education and even worked part-time in education shortly after college, and I have nothing positive to say about education in America. To even begin to understand technology, I had to major in computer science, and even then the courses were tailored to the assumption that I was going to become a Java or VB programmer. My instructors were flat out bad, and the most I learned in any course was when I finally chose to ignore the instructor and just use class time to explore open source code, because it was there, open, available, and good.

I would love to see education embrace open source, not only because the technology is useful, but because the idea of participation in education is vital, but it's missing in every school I have ever attended or taught at. Nobody wants to make education "real", they all just want to go through the motions. Imagine how it would be if everyone spent their days creating the courses as they happen, trying to improve their own experience and the experiences of the next round of students. I had that unique experience once in a programming class I taught in a non-traditional school startup and it was amazing for all of us.

John Harper's picture

Technology is not the disruptive factor in education. The disruptive factor is the public education industry's failure to truly educate young people. (In the USA at least)

That failure has catastrophic consequences for individuals and the civilization. The last time it happened, humanity spent a millennium in the "dark ages".

It is hard for me to tell if technology is part of the problem or part of the solution. Maybe it is both, but it is hubris to think we would be having this discussion if the educational system was fulfilling its stated mission in even a minimally acceptable fashion.

The fundamental purpose of education is to teach young people how to communicate and understand complex, abstract ideas effectively (IMHO). Everything else (including math and science) stems from that ability. Without it, young people become frustrated and dangerous because "no one understands".

I was forced to learn to communicate by being forced to learn spelling, rules of grammar and vocabulary by memorization. Then I was forced to put it into practice by reading, writing book reports and essays and diagramming countless complex sentences on a blackboard in front of the class before I could get a public high school diploma. That was in a very small, rural backwater (pop 2,000) in far West Texas during the 1950s. Today's graduates from the same school are functionally illiterate.

Maybe technology can offer a easier, cheaper, better way. I hope so.

John Harper's picture

Yes, I am replying to myself. It is perfectly acceptable for anyone with a valid Medicare card to talk to themselves out loud and in public.

Linguistic precision is necessary for civilization to progress. As the humanity becomes more complex and interdependent, being able to express and comprehend precisely becomes more important. Those working to apply technology to education should keep that at the top of the list of priorities, in my opinion.

To illustrate that idea, here are four quotes from Dylan Grice's article in the Edelweiss Journal Issue 14, dated 4 November, 2013. ( The article is about macro economics and financial policy that may not interest educators or IT professionals. The last quote illustrates why we may plunge ourselves into a new dark age simply because we lack the ability to communicate effectively.

"But to understand the practical consequences it must be understood that language isn’t only a reflection of thought and action. It is a driver too. Language is our cognitive machinery; it shapes our ability to interpret, recall and process concepts".

"Lera Boroditsky, writing in Edge a few years ago, describes an Australian Aboriginal community whose language references direction in absolute terms, rather than the relative ones Indo-European languages use. Instead of telling someone to “watch out for the ditch ahead,” for example, someone from the tribe might warn a fellow member to “watch out for the ditch southeast.” Boroditsky writes that “the result is a profound difference in navigational ability and spatial knowledge” between the tribesmen and their spatially-relativist Indo-European speaking brethren".

"As it happens, the Zuni have no separate words for the colors yellow and orange and therefore insufficient linguistic precision to process the difference. It is often said that sloppy language leads to sloppy thought. These studies and others like them conclude the same from the other direction: linguistic precision leads to cognitive precision. If distinct concepts are poorly defined they will be poorly understood".

"Therefore, not only is there insufficient capital to ensure future prosperity and insufficient realism to deal with the future this implies, there is insufficient linguistic precision for most people to articulate the problem let alone understand it".

jadudm's picture
Open Minded

Yes, I am replying to myself. It is perfectly acceptable for anyone with a valid Medicare card to talk to themselves out loud and in public.

I, for one, am not going to get in the middle of that argument!

(Nor I!)


Humor aside, I have learned, as a computing educator, that teaching and reinforcing effective reading and writing skills (in a technical space or otherwise) is challenging. When students don't have foundations laid down well (like reading and writing), it gets in the way of lots of other learning. It is a major roadblock when you want to see students engage in independent exploration, or when you're trying to encourage students to engage material deeply outside of the classroom.

I found both Early Reading Instruction and Language Development and Learning to Read (both MIT Press texts by Diane McGuinness) to be fascinating, informative, and comprehensive in this space. They didn't directly help me as a post-secondary educator, but they did inform how I think about reading and writing instruction, as well as how I think about the teaching of programming to novices.

The next time I wander into the Open Source Diner, I'll make sure not to interrupt your conversation with yourself (even if we do agree), but I will pick up the tab on your coffee, if that's OK. Just because it seems like the neighborly thing to do.