This is not an article, it’s a challenge. By taking a few specific actions, we can make our businesses more competitive and innovative. And together, we can stop me from writing another melodramatic article about education.
Here’s the why and how…
From the streets of Egypt to the aisles of Walmart, there’s one consistent theme emerging. Freedom. Liberty. The details might vary, but everyone yearns for freedom to choose how to spend their limited time on earth – and with whom. To attain it, we’ll need to navigate a minefield of shiny distractions, noisy bullshit artists, and man-made “rules” we’ve come to accept as truths. One of the most egregious is the college degree. It has mutated from a tool of empowerment to one of enslavement.
I won’t bore you with all the details, but here are five fun facts…if you’re a university bursar:
1. As real wages have declined, tuition has skyrocketed.
2. The average 2013 college graduate will exit one of our fine US sinstitutions with $35,000 in debt.
3. Half of college grads will work in jobs that pay little and don’t require a degree.
4. Yes, college grads still earn more and have lower unemployment, but the aggregate numbers hide one uncomfortable truth. The most valuable degrees come from a handful of “trade majors”. Trade majors? Yes, a few majors that teach specific, job-related skills produce the highest salaries. Engineering, computer science, applied mathematics, medicine, and finance. Financially, an arts or writing degree -without a dad named ‘Spielberg’, is like punching your parents in the stomach and setting their house on fire.
5. As this tool from Businessweek shows, pricier schools don’t necessarily produce better results.
Why is this happening?
There are two big reasons:
Misguided lending bubble: As I wrote in Econovation:
Banks are willing to lend virtually unlimited amounts to students. Why? [They] successfully lobbied to keep students from defaulting on tuition loans. If a student stops paying, the government pays… Schools soak up every last penny by raising tuitions… Students carry bad credit scores around forever, like scarlet letters.
I’d be writing this exact same article about The Great Laptop Crisis if the government provided unlimited loans for computer purchases. Instead of $300, laptops might start at $2,000 and still have Windows Vista. You want to learn, don’t you…?
Without access to borrowed booty, colleges (just like computer manufacturers) would have been forced to find a price that meets as much demand as possible. (As a policy, direct subsidies and negotiating price caps would have been far better than loans.)
Captivity: Imagine if some mad genius convinced the government to confiscate all your water at the airport. Then, his company could charge $4 or more for a refreshing bottle of filtered tap. Hoards of captives would pay. Maybe at $6 or $7 a handful might ponder drinking their own sweat.
The same is happening in education. The information age demands brainpower, but a few accredited gatekeepers get to charge captives what the artificial market will bear – for what essentially, is certification of their knowledge. Hold on to that word, “certification”…
Why we (business people) must act now
No thanks, the current system works just fine for us!
No it doesn’t. Here are four reasons why:
1. Revenues: Companies spend a fortune courting customers, especially in that lust-worthy 18-34 demographic. Guess what – millions of families spend up to $50,000 a year on tuition or servicing $1.2 Trillion in debt –instead of buying heaps of Huggies, hoagies and Hulu.
2. Better, happier workers: Debt makes people miserable and unhealthy. Higher incomes make people happier and more productive. (Consider the Costco example where higher wages and benefits buy record loyalty and performance.) So, massive debt relief is like giving every employee a raise – and therapy. But only if they truly believe their kids will have a real chance at success without it.
3. The fearful don’t innovate: At first glance, it might seem you want employees completely and utterly reliant on a paycheck to pay off tuition (and housing) loans. Not exactly. That dependency also comes with fear. Fearful people never take any risks that might slightly jeopardize Johnny’s chances at Stanford. It’s a terrible mindset for innovation. Because innovation is change. One wrong move and lil’ Johnny is in Westboro Community College.
4. Real equality and a new social contract: No one can ever make the world perfectly fair. I was born with this face. It has yet to earn me a free drink or entry into the hottest nightclub. Others come from wealthy, connected families with generations of Harvard grads. Their kids could afford to take free internships, while immigrant grunts like me needed to take paying jobs. That’s life.
The idea that perfect equality is achievable is silly. But we can have a knowledge and effort-based system without expensive diplomas as barriers. We can send a message to every student that if they go the extra mile to learn, we’ll meet them halfway to recognize their efforts whether they came from Harvard or Wikipedia or Codecademy. In a way, this is a more meaningful form of diversity – based on differences in experience and effort.
How do we start changing the system?
Okay, enough teasing. Here’s what every business person can start doing today.
1. Test for talent, not degrees. Not long ago, the only way to discover new music was radio. The industry was riddled with record company gatekeepers. Decades of payoffs in cash and coke saddled us with a lifetime of Fleetwood Mac. Today, music discovery happens in many organic ways through services like Spotify, Pandora or iTunes. And it’s based on taste and quality, not bags of blow.
Today’s universities are yesterday’s record companies. Talent doesn’t have to come from one of the major “labels” (aka schools). We have the technology to implement mass-discovery. We can pre-qualify thousands of candidates for the right skills, motivation, and personality fit – at scale. This rewards effort and eliminates the need for expensive diplomas. Startups like HireArt are starting to do this already. Even I’m working on one…
2. Create an apprenticeship program: Most learning happens on the job. My first job out of school was in audit for Andersen. I could not have been less prepared. I had zero practical understanding of financial statements – until my first client. Sorry, NYU. If some horrific event had wiped out my entire company – and only our chimp mascot and I survived, I would have advised my client to start with the chimp.
Top professional services companies are great at on-the-job training and knowledge sharing. They can easily extend that to apprenticeships. Other companies can do the same by hiring straight out of high school, military, or civil service. Germany is already building that model across industries.
If even 10% of all new hires come through apprenticeship programs, that’s billions saved in college debt. Not only that, as I wrote in HBR, helping others is one of the last satisfying aspects of modern office jobs. It can generate as much benefit for the mentors as it does for students.
3. Incentivize managers to disproportionately hire from schools with the lowest tuitions. Over time, this will pressure all colleges to lower their rates and improve job placements. (Note, some schools outright lie about job placement.)
4. Promote and credit modular education: Accenture and Andersen did this really well. The company’s philosophy was that field practitioners could teach new skills to colleagues better and faster than any school. I taught strategy and operations to new hires at the company’s Chicago-area campus. Today, companies don’t need a campus. Internally, podcasts, articles, Skype and videos are easier than ever for employees to produce and distribute. Externally, there are plenty of corporate training companies and inexpensive online courses from startups like Udemy and Coursera. Equally important is crediting employees and job candidates for their modular, non-traditional education. A startup called Degreed is helping companies make that transition.
5. Set up PILOTS – Whether it’s apprenticeship or new hire testing, we don’t have to implement everything all at once. It’s not Obamacare. Start with a department or two. As the programs mature, gradually phase-in higher percentages of apprentice and non-college admissions. (I’d be more than happy to help your company get started.)
6. Influence others: Even if you’re not directly a hiring manager. Influence others to think more broadly about this subject. Send them this article.
As more diverse, less indebted workers enter the market, certification authority will shift from schools to businesses. Today, a school’s culture and reputation “brand” each graduate to marketplace. Whether a student soaked up every morsel of knowledge or every ounce of beer, that diploma certifies ’em fresh, like the FDA does with beef. It’s only later in a career that knowledge and experience surpass school branding. Just watch VC’s trip over themselves to fund anyone who’s worked at Apple or Google – even if was in the cafeteria. The same thing can happen across the board as more students will be able to put GE or Pepsi or American Express on their resumes – sooner rather than tens of thousands of dollars later.
How do I know this is possible?
I have nothing against formal education, but I resent phony markets that take advantage of so many people. They can and should be disrupted – with extreme prejudice. We are surrounded by more information than ever. Your tender parts are probably being irradiated by some of it right now. Most of it is free and we can harness its power.
When companies were drowning in legal costs, they cut them, en-masse. Now that we’re surrounded by debtors, impaired consumers, and scared employees it would be a shame if we couldn’t muster the same kind of effort. All we need is 10% of new hires to come from outside the college system. So what are we waiting for?
I commit to do my part. I will create a page for companies to publish their lessons and success stories. (No PR BS please.) You can send them to me here.