Universities, we learn, face imminent disruption. They may not endure amid a wireless world. Revolution looms while a teaching model with a millennium of history vanishes. There will be no more classrooms where lecturers can cast ‘bogus pearls before real swine’, as the Oxford political theorist and philosopher Isaiah Berlin once described undergraduate teaching.1 Higher education, predicts the Washington Post, is ‘headed for “creative destruction,” a profound structural and economic shift in favour of employers, students and parents’.2 The Economist offers a similar view: the three forces of rising costs, changing demand and disruptive technology will result in ‘the reinvention of the university’.3
Creative destruction is a familiar trope. Digital media, delivered through the ubiquitous web, sweeps away newspapers, book publishers, video-rental stores. The broiling inventiveness of entrepreneurs challenges, erodes, replaces. As one prominent technologist advises, ‘demolition sets in motion the change necessary for innovation. A would-be innovator has to get rid of something in order to make room for something new to emerge’.4 Silicon Valley becomes a symbol of such permanent undermining and reinvention.
Yet creative destruction is an idea with its own history. In the nineteenth century, philosopher Karl Marx spoke of capitalism destroying its own, undermining existing production with ever-more efficient techniques, driving down prices until the system collapsed. A century later, economist Joseph Schumpeter both expanded and modified the analysis. Capitalism, he agreed, is never stationary. It evolves constantly with improving technology and expanding markets. The old is overthrown from within as invention and competitors demolish existing local economies and create fresh industries. It is a cycle marked by frequent instability but not necessarily doomed to collapse.5
This was a good subject to ponder while on a train. To make his point, Schumpeter recounted the unintended changes to agriculture wrought by the Illinois Central Railway. Before the railway arrived, a local economy of small farms served the nearby Chicago market. They were close enough to transport produce to the city, yet protected by distance from competition. Prices were good and the local farms thrived—until the 1850s, when railways pushed into the Midwest. New tracks changed the economics of transporting produce, supported by advances such as grain elevators. The cost of freight fell to just a few cents a ton, quickly depressing demand for existing transport infrastructure such as turnpikes and canals.
The ‘Main Line of Mid-America’, as the train line to Chicago fashioned itself, changed the rules. Suddenly, large and efficient agricultural enterprises far from the city could freight in fruit and vegetables at minimum cost. The once thriving local agricultural economy collapsed, unable to compete on price or volume. Innovation instantly improved the lives of people in Chicago, through better and cheaper produce, but shattered nearby farming communities, which lost their livelihood. The Illinois Central Railroad delivered ‘very good business’ for some but a ‘death sentence’ for others, who fell victim to Schumpeter’s ‘perennial gale of creative destruction’.6 The creativity of capitalism, led by entrepreneurs, constantly sweeps away the economy it calls into being.
Oxford experienced a similar shock. The university opposed an extension of the railway to the city, concerned that easy access to London might tempt ‘improper marriages and other illegitimate connexions’. The argument was lost and a line opened in 1844. As in Chicago, there were winners and losers. Local coaching trade and canal traffic fell sharply. A long-established community of river fishermen could not compete with the ‘large quantities of reasonably-priced, fresh and good-quality sea fish’ freighted to the city by trains.7 Internal migration in search of employment followed, along with manufacturing, and once-quiet Oxford grew rapidly.
Letters to The Times complained as ‘the spirit of business and the clouds of smoke’ pervaded the medieval city; the railway was changing forever the economy and character of Oxford. The sudden influx drew dark mutterings about the university becoming a cramming shop, where ‘the railway brings in the fools and takes them away with their tickets punched for the world outside’.8
In 1844, as the railway reached Oxford, JMW Turner exhibited his masterful painting Rain, Steam and Speed: The Great Western Railway at the Royal Academy. Here was the Victorian vision of unstoppable progress. Through driving rain a train rushes across a bridge, powerful, irresistible and likely fatal to a hare that has strayed onto the tracks. New machines rip apart the settled world, a blur of steam and mist transporting the future. The novelist William Thackeray was impressed by the sense of animation in Turner’s painting. ‘Here comes a train down upon you,’ he recorded.9 Stand in the way, like some dissenting dons of Oxford, and the future may just run you over.
So I’m thinking about railways and the disruptive technology of the nineteenth century on a train to New Jersey. It is mid-winter, and New Brunswick is a long, cold ride from Penn Station in Manhattan. The New Jersey Transit leaves the city and suburbs until the scenery seems an endless process of small depressed towns strung along the line, many with closed factories lost to international competition. Few students alight from the clean but virtually empty train in January, leaving the streets of New Brunswick bleak and deserted. Yet for much of the year this is a lively place, one of several college towns hosting campuses of the State University of New Jersey. The coffee shops and pizza parlours lining the freezing walk from the New Brunswick train station to the front gates of Queen’s College are closed for the New Year break. They serve a campus chartered in 1766 and later patriotically renamed for a hero of the American Revolution, Colonel Henry Rutgers.10
The university now bearing his name spans New Jersey and serves the 9 million residents of the state. Rutgers is the result of successive amalgamations, a combination of former independent colleges dotted around New Jersey. It operates from three regional centres. Like many Australian public universities, Rutgers must find ways to speak with staff and students scattered across many communities. It does so through extensive investment in teaching technologies, broadband connections that allow a Rutgers law professor in Camden to address a class in Newark, a study group in New Brunswick to include students across the network.
As usual, the promise is better than the delivery. Rutgers has excellent equipment, but watching distant figures on a plasma screen with slow refresh can be hard work. Still, the university sees itself at the forefront of a new delivery model for higher education. The campus remains the focus of the university experience for Rutgers students, while computers and television monitors link students to a richness of course material and teachers beyond the resources of any single site. In this, Rutgers again mirrors practice in many Australian public universities. The future becomes a blend of personal attention from the lecturer supported by online content and delivery. Such universities have embraced new teaching technologies, and should be safe from too much creative destruction.
Or so the Rutgers leadership thought until Phoenix appeared. Calling itself a university for working adults, the for-profit University of Phoenix offers a range of bachelor, masters and doctoral courses. Students can study online and attend local learning centres to interact with contract tutors. New classes start every five weeks, so there is no need for students to wait for an annual admission cycle. The offer is courses leading to employment—business but not arts, health administration but not social work. Students can work from home. Everything from attending classes to registration, even buying course materials, can be done through the internet.
In 1976, Phoenix was just one among many marginal US colleges, offering courses from a small campus but also by correspondence. It was not perceived as a threat by public institutions. Four decades later, Phoenix is America’s largest accredited private university, claiming over 100 degree programs, nearly 1 million alumni and, at its peak, as many as 600,000 enrolled students. Phoenix boasts more students than any other tertiary institution in the United States and, likely, the world.
When I first visited New Brunswick more than a decade ago, Rutgers Vice President, Ray Caprio, recalled his first inkling of change. He had heard about Phoenix but was unconcerned. How could an internet provider, without research facilities or serious professors, compete against Rutgers with its history, scale and deep attachment to the people of New Jersey? Rutgers would always be the more desirable destination, with its attractive mix of campus life and interactive video teaching facilities.
Innovation always attracts sceptics. Many university graduates, Kaplan CEO Andrew Rosen insists, find suspect any tertiary experience unlike their own, ‘and for a large percentage of the nation’s elites, that means Gothic buildings, Frisbee on the quad, and Saturday football games’.11 Yet if academics dismissed Phoenix, general staff at Rutgers seemed more impressed. Many wanted to upgrade qualifications for career advancement but could not face the high fees and lengthy courses of their own university. Several passed over Rutgers offerings to enrol in the Phoenix MBA program, attracted by its moderate prices and accelerated timetable. Intrigued, Caprio sponsored a staff member to undertake two courses at Phoenix and used the opportunity to assess the quality of course material offered by the virtual provider.
‘Though all our academic prejudices make us want to discount Phoenix,’ Caprio reported, ‘actually the stuff was pretty good. Phoenix will stick to popular paying courses like the MBA and nursing. They’ll never teach philosophy but they will be a force.’
Phoenix has achieved prominence in a landscape otherwise littered with e-learning failures. It has refined a business model that avoids investment in the expensive infrastructure of higher learning—those spires, cloisters, gargoyles and cumbersome overheads, such as tenured staff and libraries, that define a traditional university. Instead, Phoenix reaches out to students in America and beyond who want college education at reasonable cost and study without leaving home. Rutgers has spent vast sums on information technology to knit together three campuses in one small state, only to see a private competitor use the same equipment to span the entire American continent and, increasingly, the world. As Ray Caprio looked out his office window at desolate New Jersey in January, he could see a competitor not tied to a single place, bound neither by railway lines nor state boundaries. Here was the Main Line of Mid-America, a train rushing out of the mist.
Phoenix was no overnight success. It began with a curriculum delivered by mail and moved online in 1989. Some reports suggest twenty-five years of cumulative losses before the university reached the scale necessary to make an online approach financially viable. Success brought serious challenges. Phoenix faced sustained criticism about marketing and enrolment policy. There were court battles, disputes over financial aid for students and internal disputes among shareholders. Enrolments fell and prospects dimmed, though the company was still valued at more than a billion dollars when traded in 2016.12
Where Phoenix pioneered, others followed. Private colleges founded by entrepreneurs, often with long histories in vocational education, saw an opportunity to challenge the public university sector. DeVry University began in 1931 as a training school, while Kaplan started the same decade as the Quest Education Corporation. Both became universities around the year 2000, tapping into growing demand for qualifications. With campus and online offerings, these have become large and sophisticated operations; Kaplan Chief Learning Officer, Bror Saxberg, is a recognised leader in learning sciences.
Though private higher education has been lucrative for a handful of providers it has proved a tough market for many, with numerous commercial failures. Promising online tertiary initiatives from prestigious universities, such as Columbia University in New York, produced embarrassing losses. A joint public–private venture in Britain labelled UKeU opened in 2001 and closed three years later with losses then valued at over £62 million. An MBA from Universitas 21 Global, an international network of research universities, faltered after modest enrolments. Making e-learning pay has proved difficult, but the survivors now lead the challenge to traditional universities. Online providers are the vanguard, and their revolution is streamed.
Ray Caprio grasped earlier than most the transformation heralded by Phoenix. Though e-learning still commands only a small portion of the market, here is a new business model for higher education, as online learning dispenses with a campus as the core of university life. The university becomes a virtual exchange connecting contracted teachers with paying customers. It is a business in which not academics but professional management makes decisions about hiring, course content and delivery in response to market signals. From the sunny American south arises a new creature, a for-profit approach to higher learning. For Rutgers in the frozen north, this is a worrying vision. Public universities have glimpsed the future, and it may pass them by.
The concept of an internet university runs sharply against the grain of tradition.13 Universities are distinctive settings, not websites, tutorial chatrooms and Skype instructors. A sense of the university is shaped by history, familiarity and reruns of Brideshead Revisited. Phoenix is disturbing for some because it dispenses with every aspect of the standard package—a campus, lectures, laboratories, cafes and libraries, sporting clubs and student theatre. There is no rhetoric about building character or lifelong skills, no commitment to comprehensive knowledge (the ‘universal’ in ‘university’). Education is about employment, an instrumental investment, and anything not essential to securing a qualification is jettisoned. In contrast to the solemn claims of public institutions, Phoenix does not assert that teaching and research are inextricably linked. On the contrary, this private institution shows no interest in original scholarship as an essential part of its university.
In the tradition of creative destruction, Phoenix proved to be only the first innovation cycle. It took numerous iterations before the mechanisation of cotton spinning and weaving achieved success,14 so it is not surprising that higher education likewise provokes experimentation, with many attempts cast aside in the search for a viable business model. The innovator found itself challenged by new entrants. Phoenix maintained some familiar features of the public university—courses, academics and study centres if not campuses. With the rise of massive open online courses, a further insurgency questioned even the residual features of a university embedded in the Phoenix model.
This second cycle adopted the idea of a campus without walls but dispensed with the long-established outcome of higher education: the degree. In 2011, Sebastian Thrun and Peter Norvig from Stanford University offered the graduate-level course CS221: Introduction to Artificial Intelligence to anyone with an internet connection. More than 160,000 students signed on, two-thirds from outside the United States.15 Enrolment did not count towards a Stanford qualification, but those who completed the course could receive a Statement of Accomplishment. Soon Silicon Valley shared stories of job seekers turning up with such statements rather than degrees, demonstrating proficiency in a particular software of interest to a specific employer. Why study for a four-year degree when employers need coders now and will hire on evidence of job-ready skills?
Massive open online courses—MOOCs—available for free online began with information technology subjects but blossomed quickly into other disciplines. Soon students could study any topic that interested an academic somewhere on the planet willing to produce content and support the vast numbers who might enrol. Harvard offered a MOOC on ‘Hamlet’s Ghost’, the ANU one simply called ‘Ignorance!’ Students could peruse ‘Bipedalism: The Science of Walking Upright’ from Dartmouth or ‘Sexing the Canvas: Art and Gender’ at the University of Melbourne. Such topics attract 50,000 or more students on each offering, most of them graduates keen to keep learning. Universities that ventured tentatively just a few MOOC offerings have found themselves suddenly with a million or more additional students sampling their wares. Start-ups such as Coursera and EdX emerged to curate offerings, creating catalogues of courses. Coursera now reports more than 22 million registered users, including those keen to buy a credential that confirms their MOOC studies.
The MOOC success shows that technology could support tertiary teaching at scale. In January 2012, Sebastian Thrun left his teaching role at Stanford to found Udacity, a Silicon Valley education company with a mission to change the world. The popularity of MOOCs convinced Thrun that learning can be ‘accessible, affordable, engaging and highly effective’ and, importantly, offered at ‘a fraction of the cost of traditional schools’.16 Udacity planned to make computer science available online, then branch into related fields. It would replace lengthy college degrees with qualifications focused on getting people swiftly into information technology jobs.
Venture capital, excited at the prospect of new markets to conquer, rushed to support Udacity, which soon found premises in Menlo Park, California, and a young, talented staff. For visiting delegations, Sebastian Thrun shared his well-developed critique of existing universities and his vision for disruption. He contrasted the flexibility of Udacity with the governance issues plaguing older institutions. Thrun planned to avoid the bureaucracy endemic in universities; indeed, he promised to run his company without meetings or supervisors.17
The journey proved more challenging than expected, demonstrating Mark Twain’s observation that education is ‘the path from cocky ignorance to miserable uncertainty’.18 Just as the first cycle of innovation saw many failures, so many second-cycle companies struggled. For Udacity, an ambitious partnership with San Jose State University came to grief, and the company pivoted towards vocational training. It launched ‘nano degrees’, short courses in areas such as data science, machine learning, web development and the Android operating system. The current Udacity program offers online instruction, coaching, career guidance and a ready-made portfolio for prospective employers. Udacity even guarantees relevant employment within six months of graduation or money back. Yet sometimes innovation is not enough; though the company reported enrolment growth, in April 2016 Thrun stood down as chief executive.
Other new entrants remain keen to succeed where Udacity struggled. Minerva is a San Francisco start-up that uses a standardised curriculum delivered on a proprietary online platform. When founder Ben Nelson is feeling expansive, he claims Minerva will replace the liberal arts college with courses that can be delivered around the world. Using a direct-instruction approach developed for school students, Minerva ends the independence of academics to design their courses. Instead, students access a highly structured curriculum that controls precisely the content conveyed. Regular online quizzes test student comprehension before moving to the next concept. Designed to challenge an Ivy League education, Minerva offers a college experience at half the price of traditional university tuition and accommodation. There are no lectures, so ‘the professors can live anywhere, as long as they have an internet connection’.19 This is not a university as a collegiate institution, with staff offices and libraries, but a consortium of teachers and learners linked by technology.
With an annual entry of only 220 students, it will take Minerva some time to spark radical change. Yet Minerva is only one of countless new institutions being founded. Change is in the air. Content has become ‘free and ubiquitous’, notes Daphne Koller, who helped found Coursera. The only universities that will survive, she contends, ‘are the ones that reimagine themselves in this new world’.20
While private education makes inroads, millions of students continue to enrol in traditional higher education offerings. Reports of the death of the public university are much exaggerated. For most students, higher education is about knowledge rather than just content, and here context and immersion matter. Still, no one misses the intent. Entrepreneurs plan to break the university monopoly on tertiary qualifications. Phoenix transferred existing academic offerings to an online world. Sebastian Thrun went a step further, taking apart the traditional university offering. Degrees could be broken down into individual courses, and eventually into single competencies, each sold separately.
This ‘unbundling’ of universities resembles the trajectory of recorded music, from buying albums in a record store to downloading individual songs online. Ever shorter offerings make content more digestible—degrees can be ‘broken into modules; modules into courses; courses into short segments’. Lecturers are told, without much evidence, that six minutes is the ideal time for a video explaining a new concept, and four weeks the course duration most likely to hold student attention through to completion.21
For students, the arrival of online educators provides an alternative to the campus-based public university with its familiar menu of degrees, semesters and academics concerned with garnering time for research. Phoenix offers a frankly utilitarian narrative: university is not a place for leisurely self-exploration or the slow accumulation of graduate attributes. It is about securing a better-paid job with the lowest student debt possible. Since a qualification is essential in much of the labour market, universities stand between people and employment.
Some entrepreneurs now question the worth of any university credential. Why study at all? Business magazines publish lists of billionaires who never attended, or quickly dropped out of, college—notably Bill Gates and Mark Zuckerberg.22 One co-founder of PayPal, though himself a graduate of Stanford Law School, argues that tertiary study is just following old career tracks. Winning a place at a university should suffice; for the truly talented there is no need to spend years on campus. The Thiel Fellowships—$US 100,000 over two years—reward young people who put aside study to focus instead on a new business idea.
Critics of this attack on tertiary education note that people will have richer, healthier lives if they finish their degree. Research shows the best-performing new ventures are not invented by 20-year-old college drop-outs but ‘started by alumni with about 10 years of professional experience after graduation’.23 Still, thousands apply for a Thiel Fellowship each year, hoping to be rewarded for not going to university.
Not every entrepreneur seeks to disrupt the entire university experience. Some in the edutech sector hope to colonise specific steps in the teaching cycle—the design and delivery of course content, student learning, detecting plagiarism and contract assignment writing, recruitment and admissions processes, online tutoring services, third-party fund-raising and alumni relations. They offer simulations to aid learning, new student credentialing processes, promises to match graduates with jobs. This new private market raises the prospect of a ‘plug and play’ university, an online institution that contracts out every aspect of its operation, from teaching to administration. The stakes are significant—some $40 billion in venture capital supports projects to take over aspects of the familiar public university.24
For the Illinois fruit farmers and Oxford river fishers, creative destruction came quickly. New technology arrived on rails, and ended abruptly an older way of life. Many predict universities face the same swift falls in audience and revenue experienced by newspapers and free-to-air television. The Economist laments the ‘many towns and cities’ about to lose valuable income as universities decline.25 Yet despite the predictions, public higher learning continues to grow.
Schumpeter may not be surprised. He observed that creative destruction is not necessarily incessant; revolutions can ‘occur in discrete rushes which are separated from each other by spans of comparative quiet’, much as punctuated equilibrium may mark the process of evolution.26 Public universities have moved swiftly during pauses to anticipate and respond to market changes. They spawn their own online degrees, adopt nano qualifications and mirror private providers in offering students ‘badges’ that attest to skills acquired beyond the classroom.
Staff from public universities crowd conferences on the coming change, adopting the language of those dedicated to destruction. Once only entrepreneurs talked of ‘stackable qualifications’, enabling aggregate degrees drawn from the programs of many providers. Now Silicon Valley finds unexpected competition from the public sector. Institutions such as Arizona State University rework curricula for online delivery and form alliances with Starbucks to roll out employee education programs. Georgia Tech in Atlanta has transferred its prestigious Masters of Computer Science to web delivery, offering an internet version of the degree for less than 20 per cent of the cost of studying on campus.
In Indiana, former Governor and now President of Purdue University, Mitch Daniels, surprised staff and legislature alike when his public university purchased private Kaplan University. By acquiring an additional 32,000 students, fifteen campuses and 3,000 employees operating without the constraints of public ownership, Kaplan U provides Purdue with a new channel to students across America. Some view the deal as ‘as an exciting evolutionary step for public higher education’, others as a ‘dangerous threat’.27 Few predicted public universities would start buying their private rivals.
The contest for students has also encouraged a return to basics. Faced with an online challenge, many public universities stress the full campus experience, much the way rock bands shift focus from recordings, which are easily obtained, to live performances, which remain a rare and personal experience, impossible to reproduce on the web. The peril of creative destruction has seen surprising new expenditure on impressive buildings and teaching facilities, in particular student accommodation, all designed to entice students back to campus. Recruitment processes stress the cohort experience, a like-minded group of enduring friends first encountered on campus.
Back at Kaplan, CEO Andrew Rosen believes a ‘back to basics’ campaign by public universities will not be sufficient to save familiar institutions. Twenty-five years from now, he predicts, tertiary education will be structured around mobility, allowing students to choose courses from multiple providers. Learning will be more personal, focused on individual outcomes, offered in ways that are more accessible, global and just ‘cooler’. These trends, he concludes, are ‘inevitable’.28
Entrepreneurs see public universities as still provider-driven, organised for the convenience of academics with long summer breaks as time for research. They suggest this is no longer acceptable to students with many new choices. This alternative vision of higher education challenges the unique role of the university in generating and sharing knowledge. It calls into question the idea of a degree, the necessity for a special place called ‘a university’. The first innovation cycle made study accessible to those who might otherwise miss out on tertiary education. The second reminded the world that a standard tertiary qualification is not the only valuable certification. A third cycle—and those sure to follow— will nibble away at the tertiary sector until, perhaps, the familiar model of a public university falls beneath the wheels of creative destruction.
To endure, the public university will need resilience and innovation. Its friends should also encourage experimentation. There are numerous alternative models of higher education worth trying in Australia. With more variety, more institutions can find ways to thrive. Even in a world where information is pervasive, judgement and expertise will still be honed through encounters with scholarship.
For Australia, this is a challenge with particular urgency. The nation has developed an idea of the university that makes university study accessible and consistent across Australia. Yet it is a model with a singular lack of diversity. Australian public universities are alike in key ways—they are large, highly regulated, largely non-residential institutions offering standard degrees, linking research with teaching, stressing familiar pathways to professional standing. If new modes of study attract large numbers of students away from existing public universities, the sector will prove vulnerable to changes emanating from Silicon Valley and entrepreneurs closer to home.
From his campus by the rail tracks in New Jersey, Ray Caprio has seen the rise of Phoenix as evidence the future of public universities cannot be taken for granted. Other venerable institutions have vanished, and a thousand-year tradition is no guarantee of continued viability. Creative destruction, like Turner’s train, hurtles towards us all.