Red Pen Edit: Scott Galloway on the Future of Education

The demise of higher education is greatly exaggerated

Photo by Leon Wu on Unsplash

I have a begrudging respect for Scott Galloway. First, he’s a fabulously successful entrepreneur who has also taught at NYU for the last 20 years - something I wish happened more often. He makes bold predictions and is an independent thinker. The latter quality alone sets him apart from most. He has provocative takes on a lot of issues, and I always enjoy reading articles by him. This NYTimes Profile has a negative slant but does a good job describing him. On the other hand, sometimes his takes feel like they are designed to stir up attention more than anything else. I know the most about higher education, so below are some comments from an interview he gave during the Covid pandemic about the future of higher education. I found many of his predictions to be highly unlikely then, so I made a note to check back on the article later and see how accurate his predictions were.

Full interview link: https://nymag.com/intelligencer/2020/05/scott-galloway-future-of-college.html

Below are some excerpts from the article, with my comments below each excerpt.

In 2017, Scott Galloway anticipated Amazon’s $13.7 billion purchase of Whole Foods a month before it was announced. Last year, he called WeWork on its “seriously loco” $47 billion valuation a month before the company’s IPO imploded.

I’ve never liked the “X predicted Y, so believe X when they predict Z” line of thinking. Everyone has correct and incorrect predictions. Galloway, for instance, famously said that the future of retail would look like Macy’s, not Amazon. I feel like Galloway’s successes in the business world and decades spent in higher ed are way more relevant than his successful business predictions.

There’s a recognition that education — the value, the price, the product — has fundamentally shifted. The value of education has been substantially degraded. There’s the education certification and then there’s the experience part of college. The experience part of it is down to zero, and the education part has been dramatically reduced.

Happily, this didn’t come to pass. Almost every university went remote during Spring 2020. The 2020-2021 academic year was bizarre, with some schools treating their students primarily as prisoners that needed to be expelled at the slightest provocation, while others went mostly back to normal. The 2021-2022 school year was mostly normal with the exception of universal masking, and the 2022-2023 school year is back to business as usual. I would say that Covid (thus far) has had a very small impact on higher education. Some trends (such as people devaluing a college degree) are continuing as they were before.

At universities, we’re having constant meetings, and we’ve all adopted this narrative of “This is unprecedented, and we’re in this together,” which is Latin for “We’re not lowering our prices, bitches.”

This is a great point. At my university, the unofficial slogan became, “We are all in this together. By the way, you’re fired.” As others have more poetically put it, universities said “We are in the same boat” time and time again. In reality, we were only in the same storm.

I think most 18-year-olds are not prepared for college. A combination of helicopter parenting and social media has stunted and arrested the development of America’s youth. University administrators have unwittingly become mental-health counselors. I think a lot of young people, especially boys, could use another year of seasoning experience, work experience, or some sort of service. A lot of these kids just aren’t ready for the competition and the kind of intense environment that is college.

I agree with the problem, but not the solution. Many, maybe most,18-year-olds are not ready for college. I don’t think taking a gap year, as Galloway recommends, is a solution, however.

When will there be a reckoning? It has to come before classes begin this fall.
Over the next six weeks, when we realize that the deposits and registrations for the fall are down 10 to 30 percent.

This was the conventional wisdom in the Spring of 2020. As universities went remote, students’ value of school would fall so students would opt out of college altogether. This thinking betrays a total lack of absolute value vs. relative value (or opportunity cost). Yes, the college experience was significantly diminished in 2020. However, all experiences were. The idea that 18-year-olds would opt out of college en masse and instead sit at home during the height of the pandemic never seemed sensible to me. And it wasn’t - undergrad enrollment only fell 4.31 percent in 2020. A far cry from the gloom and doom many were predicting.

In ten years, it’s feasible to think that MIT doesn’t welcome 1,000 freshmen to campus; it welcomes 10,000. What that means is the top-20 universities globally are going to become even stronger. What it also means is that universities Nos. 20 to 50 are fine. But Nos. 50 to 1,000 go out of business or become a shadow of themselves. I don’t want to say that education is going to be reinvented, but it’s going to be dramatically different.

This is a great example of Galloway saying something that seems to be more about the shock value than anything else. The amount of infrastructure it would take to teach 10,000 freshmen at MIT is astronomical. Where are all these students taught? Where are they housed? Where do they eat and work out and hang out? Why would MIT give up a large chunk of its prestige by increasing its enrollment by an order of magnitude? No way- and Galloway has admitted as much. So props for that at least.

Second, there are roughly 2,900 four-year colleges in the United States. There is no way that even half of those close, let alone almost all of them. There are universities ranked well outside the top 50 that will continue to not only survive but thrive in the coming years. The University of the Pacific has one of the highest median earnings a decade after enrollment. The University of Tulsa has a billion-dollar endowment. The University of Central Florida has grown dramatically and is now one of the biggest universities in the country. None of these schools are in the top 100. They will all be fine.

We get a lot of ego gratification every time our deans stand up in front of the faculty and say, “This year, we didn’t reject 85 percent of applicants; we rejected 87 percent!,” and there’s a huge round of applause. That is tantamount to the head of a homeless shelter bragging about turning away nine of ten people who showed up last night.

This cannot be a serious statement. No city wants to have overfilled shelters. New York even has a right to shelter codified in law. Universities want to have the best students possible. While the phrasing above is tin-eared, it does represent what faculty want; better undergraduate students.

Birkin bags are $12,000 because they create the illusion of scarcity. I’ll have 170 kids in my brand-strategy class in the fall. We charge them $7,000 per student. That’s $1.2 million that we get for 12 nights of me in a classroom. $100,000 a night. The gross margins on that offering are somewhere between 92 and 96 points. There is no other product in the world that’s been able to sustain 90-plus points of margin for this long at this high of a price point. Ferrari can’t do it. Hermès can’t do it. Apple can’t do it.

This is another shock value quote. Galloway knows very well that universities have many costs outside of teaching. In fact, he is a frequent complainer about administrative bloat! Saying that Hermès has a 95% gross margin because they only spend 5% of their cost on materials is nonsense; Hermès has to pay someone to make the bags, they have to pay for storefront space, they have to pay millions to get celebrities to advertise their product so others will pay five figures for one. So no, NYU is not making 92% profits on each class.

Not education. It’s credentialing. The most value-added part of a university is not the professors; it’s the admissions department

This is a great point that is often overlooked. There needs to be much more discussion about where the value of a university comes from. How much is value added (material learned), how much is networking, and how much is signaling? Universities are loathe to acknowledge anything but the first, and I think this is a long-term mistake.

In the case of MIT, Harvard, Stanford, and Cal, people will say they’re sacrificing their standards to enroll more students. The reality is these schools can double or triple their enrollments without sacrificing anything in terms of their brands.

I strongly disagree with this. Yes, if every Ivy League school agreed to triple their enrollment, then their rankings would probably be ok. But any one school trebling the size of their student body as a first mover will be immediately punished as the perception of their institution falls. After living in New Haven for six years, people really do look down on Cornell as being a full tier below Yale. Cornell also has by far the biggest Ivy League undergraduate enrollment. I don’t think this is a coincidence.

The cruel truth of what pretends to be a meritocracy but is a caste system is that your degree largely indicates or signals your lifetime earnings.

This is true as a fact, but highly misleading. Students who attend top schools do have higher earnings, but the economic scholarship shows this is mostly because they are better students to begin with. This is called selection bias - see Dale and Krueger (2002). Of course students who go to Harvard are going to make the most money; they are the hardest and smartest workers!

Putting all of learning on Zoom is very difficult to pull off, as people are discovering right now.

I don’t think it’s difficult; I think it’s impossible. For a select few students that are incredibly self-motivated, online college is a good option. For 99% of individuals, in-person learning will always be preferred. The ability to ask questions in real-time, to present in front of your peers, and just having face-to-face contact has value.

The reality is an MIT degree is still worth a quarter of a million dollars in tuition. But is Boston College worth a quarter of a million? I don’t know.

Compared to what? The rate of return for the typical student graduating from Boston College compared to someone who didn’t attend college at all is well over a $250,000. Of course there is the same selection bias discussed above. It would be interesting to completely price this out, but my guess is that on average a college degree is worth the tuition.

It’s kind of scary to think that the University of California used to be relying on the generosity of California taxpayers and the vision of the regents of UC. And it might end up that they rely upon the generosity of Satya Nadella or Tim Cook.

I agree that this is a major issue. States have, by and large, stopped funding their “public” universities. The University of Colorado Boulder, for example, got less than 5% of its funding from the state! When state funding dries up, public universities increase their prices. When public universities increase their prices, private universities increase theirs. Now I’ll be the first to admit that universities waste a lot of money on administrative bloat, but regardless, it’s embarrassing for a public university to be public in name only.

The question is, for middle-class kids, will they happen in such a safe and joyous place? Is there something about the campus environment that exposes young people — who are more creative, greater risk-takers, and more fearless — to the world and our problems and gives them the opportunity to craft better solutions?

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Will other experiences fill those gaps in humanity? What’s going to replace that campus experience?
There’s an opportunity for something like an AmeriCorps, a Peace Corps, or the Latter-Day Saints mission. Think about mandatory conscription in Israel or Switzerland.

Yes, majoring in finance at UCLA and serving in the Israeli military are definitely comparable and can be substituted for one another.

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So far Galloway has been proven to be widely wrong in his predictions. MIT is not going to increase its size by 10x. Hundreds of universities are thriving. We don’t have a General Electric University (formerly Bentley). The American university system has some severe deficiencies and problems. And yet, students from around the world come here to study by the thousands, so we must be doing something right.