Thursday, April 04, 2013


Credit and Credibility

Several years ago, I started musing about the potential for an upscale for-profit college.  (Here’s the first piece in which I floated the idea of “Mercedes U,” back in 2005.)  Since then I’ve returned to the idea several times (such as this piece from 2010, and this from 2012).  Founders College gave the idea a shot several years ago, but flamed out quickly due to terrible planning and a quixotic Ayn Rand fixation.  As far as I know, that has been the only credible attempt.

Now Tressie McMillan Cottom is trying to put some meat on the bones of the idea.  And she’s doing it in a wonderfully bloggy way, posting a work-in-progress on her blog for crowdsourced brainstorming.  

The idea of an upscale for-profit makes too much sense not to happen.  In fact, it makes so much sense that it’s worth asking why it hasn’t happened yet.

In most of American life, for-profit providers routinely capture the high end of the market.  Think about the image of “public housing,” as opposed to private homes, or of “public transportation,” as opposed to private cars.  Generally, we use public options to provide something minimally acceptable to people who otherwise wouldn’t have anything at all; we allow for-profit providers to cater to those with the means to pay for higher perceived quality.

As the distribution of wealth has polarized, and the political discourse has failed to catch up, public institutions that try to deliver high quality to large numbers at low prices -- such as public higher education -- are getting squeezed on all sides.  Student, parent, and employer expectations for performance are increasing even as operating funding is flatlining.  But strangely, even as the publics get squeezed, the private providers aren’t doing what we would normally expect.

In higher ed, for-profits have historically focused on the “low” end of the market, competing mostly with community colleges.  For a long time, there was enough financial aid and private investment capital floating around that for-profits could charge much more than community colleges and still be fine.  But financial aid is tightening, and MOOCs are free; on the low end of the prestige hierarchy, it’s getting harder to continue to ignore cost.  We’ve long had a robust “private” sector in higher ed, but most of the private colleges have been technically not-for-profit.  (The way some of them handle endowments casts doubt on the “non-profit” conceit, but that’s another issue.)  The same is true in K-12: there’s no shortage of private schools, but most of them are technically nonprofit.  

McMillan Cottom isolates “prestige” as a relevant variable, and I agree that it’s an obstacle for any new entrant.  But it’s hardly insurmountable.  Prestige can follow from exclusivity and money, both of which for-profit companies have shown themselves more than capable of providing in other contexts.  I’m wondering if something like religion is the missing variable.

Some private colleges have religious affiliations now, but many more of them started that way.  And while public colleges are expressly forbidden from being specifically religious, much of  traditional academic culture carries unmistakably churchly holdovers.  Graduation robes are obvious manifestations of that, but it goes much deeper: the entire idea of a tenured priesthood of self-selecting men who have special access to The Truth comes straight from the church.  Even now, many academics take a vow of poverty to fulfill their callings as teachers.  There’s a sense of mission -- a religious term in its own right -- among many academics that encourages them to take economically damaging deals just to stick around.

Americans are happy to pursue profit, and happy to talk about faith.  But we get a little jumpy about mixing the two.  That, I think, is where prestigious for-profits would face the real obstacle.  Part of the prestige that attends private higher education comes from the sense of mission that relies, in a fundamental sense, on the idea that they aren’t in it for the money.  They’re in it for the mission.  Anyone who has worked in administration knows that mission and money actually bump into each other every. single. day.  (I’m told that the same is true for people who actually run churches.)  But in the public mind, the two are largely distinct.  Anyone who’s willing to live on academic wages just to get to teach ancient history must really love teaching ancient history.  The purity of motive that comes from the absence of profit sacrifices credit for credibility.

As long as for-profits stayed away from anything mission-like, and just focused on very short-term job training, the fact that they were in it for the money didn’t matter much.  But as they have expanded their “mission” to overlap with much of what traditional higher ed has started to cover -- and even to seek approval from the same regional accreditors -- the purity of motive that nonprofits can claim isn’t there.  They’ll have to find a way around that if they’re going to break the prestige barrier.

I think it will happen, but more slowly than a strict economic calculation would suggest.  Ironically enough, much of higher education has become far more secular than its institutional design ever assumed, which leads to no end of cultural tension.  Vocabularies and assumptions based on very different worldviews survive in contradictory fragments, wielded by very smart people who often haven’t reflected on their history.  Logics of priesthood coexist with logics of industrial unions, as if the two are somehow compatible.  (Here’s one: “peer review” and “worker solidarity” are contradictory.  Discuss.)  I’ve never heard of a priests’ union.

Secularization is a powerful force in American culture, even if we generally don’t own up to it.  As it takes greater hold, I wouldn’t be surprised to see some of the stigma attached to for-profit education fade away, replaced by a more pragmatic, results-oriented view of it.  At some point, prestige might come to correlate with actual quality of performance; depending on your angle to the universe, that’s either exhilarating or heresy.  

But we’re not quite there yet.  

Anyway, I’m happy to see that some very smart people are starting to ask some of the right questions.  Why hasn’t the upscale proprietary caught on yet?  What’s stopping it, exactly?  In the meantime, if you have the chance, I strongly recommend checking out McMillan Cottom’s paper and offering constructive thoughts.  There’s something here, and I suspect it may shed light on more than just the next investment opportunity.

For the moment, the prestige hierarchy in higher education is dominated by institutions that can take the long view. That's a direct consequence of their reliance on endowments. Why would you want the timeless tasks of mentoring and scholarly inquiry to be driven by institutions that live and die by quarterly profit numbers?
My question is, why haven't high-end (High prestige) private institutions expanded to fill the space that high-end for-profits could conceivable fill? (I wrote something about this a while back:
My husband has long said he wants to establish a no-frills institution. Get rid of fancy dorms, elaborate infrastructure, graduate training and just focus on quality undergraduate education. Not necessarily high-end in terms of campus, but I think we already have that high-end in the not-for profit. If by high end we mean a kick-ass education, then it seems to me that there would definitely be a market for this.
I remember posting something about the idea of an upscale for-profit school a while back.

A bunch of us here at Proprietary Art School were sitting around commiserating about our declining enrollment, our cutbacks in just about everything, and the sorry state of higher ed in general. And one of us came up with the following idea: why don’t we turn ourselves into an upscale institution, a sort of for-profit version of Harvard University?

How could we do this? Perhaps we could start by establishing a medical school. Maybe would also establish a law school, and start offering advanced degrees in all sorts of exotic disciplines. Perhaps we should bring in snooty and exclusive fraternities and sororities, and maybe even encourage secret societies like Skull and Bones. Maybe we could create a football team and start offering athletic scholarships. Or we could try to turn ourselves into an R1 university, and introduce a publish-or-perish regime for our faculty and start hiring a bunch of research superstars. Maybe we could establish a new advertising campaign that could build up a media buzz about this school--telling the world how elite we are and how hard it is for students to get into this place. We would imply that the only real chance for a student to be accepted here is for them to have IQs in the genius range or to have straight A’s in high school and to have a fistful of extracurricular activities under their belts. We would imply in the ads that a degree from this school will be a virtually assured entry into a high-paying, prestigious full time job in just about any field. If a prospective student is rash enough to think that they are good enough to get in, they should go ahead and apply, but they will be competing with superstars from all over the world for the few slots that are available at our school. Harvard, Yale, Princeton, and the University of Chicago: Look out!

We were of course just joking, but Dean Dad’s post got me to thinking. How would one actually go about establishing an upscale proprietary for-profit school, when the public image of most proprietary schools has been definitely low-scale, appealing primarily to students who have such weak backgrounds that they can’t get into any sort of “real” school? This would require a lot of money up front. Maybe this startup money could be provided by a foundation like the Bill and Melinda Gates Foundation, or even the Koch Brothers. Armed with this pot of money, the ambitious school could then pursue an agenda not unlike what is described in the previous paragraph. They could introduce advance degree programs, open up medical and law schools, and then go on a hiring binge, seeking out research superstars , offering them obscenely-high salaries to lure them away. Then the school could go on an advertising blitz, telling the world how great they are going to be and how elite the school will be.

I suspect that the most serious problem will be in changing people’s perception of proprietary for-profit educational institutions as being at the very low end of the educational pecking order. For-profit schools are primarily oriented toward training their students for job opportunities in the current market, whereas the elite universities and SLACs are supposedly oriented toward the life of the mind. As Dead Dad says, it will be difficult to marry a pursuit of knowledge for its own sake with the need to make a profit.


"Dead Dad"???? I certainly hope not.
Sorry about that.
Liberty University is probably the purest example of this phenomenon. Bob Jones comes close as a second.

I just don't see how this could work. The elite non-profits got that way by doing all sorts of things that are net losses from a business standpoint: hiring prestigious professors at high salaries who rarely teach undergrad classes, excluding well-qualified students who are willing to pay full tuition, limiting enrollment in many courses to a small number, maintaining antiquated ivy-covered buildings on large campuses, etc. All of those lose money, which is in part compensated by large endowments.

Also, most prestigious non-profits got that way over literally hundreds of years of development. I am unclear how one could start-up an elite institution today, profit or non-profit. And, if you could develop an institution that catered to high-performing students, why would they attend, instead of all the 1st-tier and top-of-2nd-tier colleges out there?
They were called finishing schools
A previous commenter brought up the Koch Brothers. Those guys own a solid chunk of my current institution, and we're always looking to sell them more of us. I think we would be perfectly happy, as an instuition, to become Koch U. if they'd just write a big enough check. But despite that, the Koch brothers don't just zero their efforts in on us - they still give money to lots of other schools.

Why would they do this instead of concentrating their power at a school they can pretty much own, or just starting up their own school they can control from the ground up? Well, to get the answer to that, you need to ask why the Koch brothers give to schools at all. They use the schools to spread their ideology. And I think that's the key word. Spread.

The Koch brothers know that if you set up a Koch U., only folks already sympathetic to their ideology will attend and work there, and people can (and will) always brush their students and faculty off as a fringe element. But if you have one or two Koch-funded "centers" in a handful of schools, and faculty paid from your coffers in institutions that dot the country, you can peddle your influence without being directly identified as a fringe element. The Charles Koch Foundation sponsors programs at 129schools. You reach a lot of people that way, people who eventually have degrees from known names like Harvard and MIT and Virginia Tech -the Koch brothers purchase prestige as part of the package already; why would they start their own school?

And if they don't, who will? Because this project is going to COST.
Graduation robes and mortarboards are a holdover from medieval regalia. See

Prestige takes time to build and tends to require eminent, highly paid professors, ivy and an endowment. I don't see a niche for the for-profits. It's not what they're good at.
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