The a16z Show - Crisis in Higher Ed & Why Universities Still Matter with Marc & Ben

Episode Date: January 14, 2024

In this one-on-one conversation, Marc and Ben tackle the university system – what has certainly been a hot topic that’s been dominating the news over the past few months. As Marc states at the top of the episode, universities matter tremendously to our world, but they’re currently in a state of crisis.Together, Ben and Marc take a “structural” look at higher education, delving deep into the twelve functions of the modern university.  They also unpack the numerous challenges that universities face today – student debt and the replication crisis, among them. They also discuss topics including DEI, student athlete admissions, accreditation, inflation, and much more. As colleges face an existential threat that could have long lasting repercussions, how can we find ways to improve these institutions, while being open to new entrepreneurial opportunities in education?Check out the Ben and Marc show: https://link.chtbl.com/benandmarc Stay Updated: Find a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

There is no incentive for an instructor to give a hard grade. And then once one professor starts taking that easy incentive, then everybody kind of does it. The classic tension is the political scientists absolutely assist that they're scientists just like the physicists. And the physicists insist, no, absolutely you're not. Do you have to create a work environment? And this is where the universities go horribly wrong. It will not surprise. Anybody has been in a college environment that you have professors who maybe are better at research than teaching.

As the student, sometimes you wonder, we've got the good part of the deal. It's fully professional sports. There's no hiding. You've got some guys getting paid. You've got transfer portal and so forth. But not everybody gets paid. Are all of these degrees and all of these institutions actually generating graduates who can actually command market wages that actually make this entire thing,

basically economically and politically viable proposition? Hello, everyone. Welcome back to the 816D podcast. This is tough. But as you just heard in our intro, today you'll be hearing from A16Z co-founders Mark and Ben. And you'll get to hear them tackle a hot topic that's been absolutely dominating the news of the past few months. That is, of course, the university system. As Mark states at the top of the episode, universities matter tremendously to our world,

but they're also currently in a state of crisis. Now, a lot of people are covering this topic, but Mark and Ben take a different approach, a structural approach to higher education by actually breaking down the 12 functions of the modern university. They also start by taking us back in time to the origins of some of these elite institutions, all the way through to today, unpacking the numerous challenges that universities face, from student debt to the replication crisis, and also other topics ranging from DEI, tuition inflation and grade inflation, student athlete admissions, accreditation, and so much more. So as colleges face an existential threat, that could have long-lasting,

lasting repercussions, the question becomes, how can we find ways to improve these institutions while still being open to new entrepreneurial opportunities in education? And of course, if you do like this episode, don't forget to subscribe to the Ben and Mark Show wherever you get your podcasts so that you're the first to receive new episodes. Enjoy. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund.

Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16C.com slash disclosures. Hey folks. Welcome back to the Mark and Ben Show. Today we are going to tackle one of the hot topics of the moment, which is the topic of the university system. Very hot topic. It's been in the news a lot lately. A couple of things we wanted to see up front. So first of all, all, I think in general, we're going to have a very kind of American perspective. So when we talk about the universities and colleges we're most familiar with, they're American. So, you know, assume we kind of

have maybe a little bit of a parochial view just in terms of what country we're talking about. But look, the most important thing is kind of why we want to talk about this. And I guess what I would say is, like, look, like universities, and I would say especially the really good ones, they matter tremendously. And they matter tremendously to the world and to the country and to everybody in the country. And they matter a lot to us. And I just want to say up front, like, they matter a lot to me. I'm more. because I got a modern university education at the University of Illinois. They matter a lot of know to Ben, who can talk about his own experiences.

And so they really matter. They're obviously in some state of sort of crisis right now. I think our opportunity is to talk about them not so much in terms of like the topics that are like super hot in the news. So we're not necessarily going to weigh in on the same stuff that you've been reading about if you've been following the last couple months of drama. But, you know, we're going to do kind of what we do, which is we're going to talk about it structurally.

So we're going to think about sort of universities as an industry and as a business and as a form of organization and as something that has customers and has constituents and has a structure and has an industrial logic and incentives, right? So, you know, thinking about this a little bit more structurally, more for a business standpoint. And then the other thing is there's two specific reasons we want to get into this today. So one is both Ben and I have a lot of friends and colleagues all across the country that are trying to basically make universities better. And some of these are people who are on boards or are running. university presidents or endowment heads or other people, alumni, professors, people who have been kind of scrubbing and hard to try to make universities better. And so we hope maybe sharing some of our perspective might help them. And then the other is, since we are venture capitalists,

there is always the possibility, but higher education is an industry and there's always the possibility of startups. And so one of the interesting questions always is when an industry is going through kind of structural transitions and sort of a lot of things are flying, there's always this question of like, well, should there be new, should there be new competitors in the industry or actually should the structure of the industry itself change? And maybe things that have been bundled in the past should be unbundled and so forth. And so we'll get into that a little bit as well. And there may be entrepreneurs listening to this who may have ideas coming out of it. So Ben, let me let me let you also add. Yeah, I'll just add. I was a trustee at Columbia

University. I'm a trustee emeritus now. I think they call me. So I have a huge interest in in kind of helping the system improve and kind of get over its current issues. The other thing I'd say about American universities in particular is they are, to a large extent, the envy of the world in that when I travel the world, many countries, the government officials and the highest-ranking people in the country send their children to American universities to study, even if they're going to come back and kind of literally run the country at a future date. So it's really been an amazing system and produced an awful lot of good. So we're going to do a lot of dissecting, deconstructing, criticizing of it,

but it's in that context. A great case study of that, Ben, is I think Xi Jinping's daughter goes to Harvard, I believe. And then, of course, particularly when we talk about the top universities, right, which are, of course, the ones that draw most of the press coverage. But, you know, they have what economists call it externality, which is their graduates end up running a lot of the country. Yeah. Right.

And so, like, basically, like, almost every Supreme Court justice either went to one of a very small number of super elite law schools, usually Harvard or Yale. CEO, if you look at the CEOs, the Fortune 500, if you look at top politicians, presidents. I think Harvard alone is responsible for eight presidents. And then there's this, we'll talk about this later in the session, but there's this policy setting function that they play where the expertise at the universities and the form of the professors and the research is used to set a lot of public policy. And so the decisions made at these places. basically end up determining a lot of the future of the country. Sure, it is. I mean, they are elite universities that produce the elites.

Yes, that's right. And the elites end up running a lot of things. So, yeah, so anyway, so that's why we want to, another reason we want to talk about this, is that the implications of sort of what's either going right or wrong at the top universities matters not just for the universities and for the people who go to those universities or teach at those universities, but also the citizenry as a whole was sort of very exposed for better or for worse to the implications of what opposite these places. So certainly a topic that I think everybody should at least think about somewhat. So the structure for what we're going to do today is so I've made my list of the dirty dozen

or 12-step program. I made a list of the dozen sort of key functions that I think are kind of most central to what modern universities are. And let me start by saying basically like where did the modern university come from is actually quite an interesting story in and of itself. The very short form of it is that the original universities, well, the original universities started in like England like 800, 900 years ago. The American universities actually started 400 years ago. American universities are actually, in some cases, older than the country. And so Harvard in particular is sort of the leading case study on this is, and I think Harvard's, I think, the oldest current one. Harvard is, I think, 400 years old. And then basically what happened is the, these

institutions have been evolving for hundreds of years. And so what they basically are today is there's sort of a bundle of functions and products and services and staffing and economic. that's sort of been evolved over the course of literally hundreds of years, right? And so I'll just give you a sense of the evolutionary steps quickly. Just take Harvard as a case study. Harvard started as a religious institution, started out basically training, religious training for basically for Protestant Puritan, religious leaders in the U.S.

And that was the knowledge at the time, right? The Bible was the best source of knowledge in the world. Yeah, if you read, if you read the original charter of Harvard, this is all right there on the Wikipedia page. It basically was charted as actually an actual religious instruction. Right, religious institution, a religious training. It went hand in hand with sort of the sort of creation of the time, what became known later of sort of the WASP, sort of Anglo-American aristocracy,

that sort of colonized New England and Iran, and basically ran the country, and basically conducted the Revolutionary War ultimately. And that was very kind of heavily Protestant Puritan. And Harvard was sort of a key note in the propagation of those values, and of that culture and of that religion. So it ran that way for a long time, and its peers then broaden it. It and its peers then broaden out. And they basically, through the course of the last 150 years or so,

they basically threaded in two foreign models, elements of two overseas models. So one was the sort of classical education model from the English universities. And so particularly Oxford and Cambridge, right? And so the idea of basically teaching sort of a classic classical politics, history, economics, basically the philosophy, literature, kind of the key topics that in England for a long time I've been viewed is sort of the way that you train leaders.

Like basically every leader in England, And every prime minister basically came through this particular program they have, I think, at Oxford called PPE, which I think it's like, it's like politics, philosophy and forget what economics, I think, are the three. And so the sort of classical education role of these places kind of came from the English model. And then more recently, starting about 100, I don't know, 100, 120 years ago, the influence started showing up much more also of the German model. And the German model was for technical education, right? And so the German model was for basically training scientists and engineers. And so most elite universities in the U.S. now at large universities, they sort of famously have both these sort of liberal arts component to what they do, but they also have what we now call STEM, science, technology,

education, or engineering, mathematics. And so the modern American university is sort of a hybrid of, it's sort of a hybrid of a religious institution, a classical education institution, their humanities education institution, and then a technical education institution. And at least like the place I went to University of Illinois, and like it was actually very interesting. as they were actually two physical size for the campus. There was a liberal arts side, and then there was a street that divided, and then there was the engineering campus the other side.

Now, at Illinois, were the STEM buildings kind of much less nice than the liberal arts building? Because that was the case at Columbia. So at Illinois, the engineering buildings were much nicer. Oh, they were nice here. Oh, okay. Interesting. So it depends who gave the money, yeah.

Yeah, so this was actually a big deal, at least at Illinois, this is a very big deal because I can tell you, the liberal arts people were very mad about this. liberal arts people the liberal arts buildings were just collapsing they were ancient and collapsing and there had been this building frenzy at the at the engineering department over the preceding 10 years before I got there and there are all these just incredible shiny spectacular buildings and people I remember people on the other side of the street were like super mad about this oh that's really funny because when I was out of Columbia and Columbia has built a gorgeous new campus

now so it's it's a little different but the old buildings were gorgeous they were from when a however Alexander Hamilton days and the new building was just like the ugliest thing you could ever see, and that was the engineering building. Yeah, maybe that tells you, maybe that's a difference between the land grants, fundamentally technical university. Yeah.

The sort of tacked on liberal arts versus liberal arts legendary institution. That's something we're tacked on technology, right? Yeah, that's right. And so, yeah, so these are good examples that kind of this hybrid, this emerged. And then, of course, we'll talk about this some. But since the 1960s, in particular,

the universities have kind of taken on of sort of, you might call sort of a more potent set of like kind of social, political, ideological roles, which we'll talk about as we get into. So there's a modern take on this too. But anyway, the point of this is as a result of how these institutions evolved is they're bundles, right? And so if you look at it as an industry, they're bundles. They do a lot of different things. And the bundle evolved. So the good news is the bundle evolved. And in general, in business, that's kind of a good way to kind of figure out what you should do is to like let evolution work on your side and figure out what works and what doesn't and add to the things that work

and subtract the things that don't. But the other thing that happens, is sometimes you just inherit the bundle. And sometimes as a leader, you want to kind of re-look at the bundle and whether this actually is the bundle that makes sense, or whether things should be split out, or whether things should be added to the bundle. And so we're going to kind of talk about it in terms of the current bundle, and then we'll talk about the potential on bundling.

Yeah, and I would say, like, one of the very interesting things with regard to the bundle, and you can think of the bundle as, like, the cable bundle where you get your ESPN and HBO and all the things in one, is that the bundle was, of course, created pre-eastern, created pre-internet. And when you and I went to school, that was significant because there was this thing where you could only get knowledge. Like the best books, the best information was all, you had to go to school to get it. In fact, if you wanted access to the internet, when we went

to school, you had to go to university. It was the only place that had the internet. And so we're in a really different world than we were even 35 years ago, which is, and, you know, and, you're in a really different world. And so that puts tremendous pressure on the bundle. Yeah, that's right. Yeah, a great example is Illinois had a famously huge library. And I remember it was like in the marketing material for both recruiting students and professors was the quality of the library because if you went there, you could do certain kinds of research that were not possible if you didn't have access to the library.

Yeah, yeah, which is very different world. But like the cable bundle, right, like you could only get HBO if you had cable. So that made the bundle very different than if you can get the HBO app. Like those are not the same world. And the university is in that same situation, but people don't point it out as much. Yeah, that's right. So let's dive into the bundle,

and I've identified my dozen kind of things in the bundle, and then, Ben, we can add things as we go. There are actually many things we could easily think we just thought of one, the library, I didn't even have in my list. But there are many, I'm sure there are many more kind of elements of the bundle that I haven't even prioritized here, but these are kind of the dozen that are top of mine for me. So, and actually, Ben, let me just run you through.

I'll just give you the headlines on these real quick so people can have a roadmap to what we're about. we're about to talk about. Yeah. And then I'll just come back to the first one and we'll dive in. So number one, credentialing agency. So credentialing students, graduates for employers.

Number two, the actual courses themselves, the education. Number three, I call the Research Bureau, right? Which is the research component that most modern universities have, right? Most universities are also, they're also a hybrid of teaching and research. Yeah, huge charter is to create new knowledge. And often how the kind of technical part

of the university distinguishes itself from industry. They kind of refer to industry as applying knowledge that was created at the university, although not always true, but it's the paradigm they love. Yeah, that's right. And maybe we'll talk about this, but professors become, professors get hired and get tenure in large part of the basis of their research in contrast to their teaching. It's not uncommon to have professors. It will not surprise anybody who's been in a college environment that you have professors who maybe are better at research than teaching. As the student, sometimes you wonder, who got the good part of the deal. Fourth, what I call the policy think tank. So this is the role of universities

in sort of setting public policy, which we'll talk about. Number five is what I call the moral instructor. And this is the sort of legacy of the fact that these institutions actually started. The original one started as religious institutions. And so kind of, and today in most mission statements in most universities, they might not outright say that they're teaching religion or morality, but they'll say things like that they're trying to inculcate values, right? Or they're trying to basically foster citizenry. They'll use terms like that. And that's basically all code for moral instruction. Number six is what I call the social reformer role, and this is the role where they not just, they not only instruct morality, but they also try to implement it themselves directly.

And this is where this very hot topic of DEI in particular comes in that we'll spend a little bit of time on. Number seven, what I call the immigration agency. And so this is the key role actually played by foreign students, which is actually really critical and not talked about enough because it turns out that foreign students at universities generally pay full freight. And so it's a big deal. international recruiting of students now is a very big deal and very core to the economic structures of these things. And there's another aspect that we'll get into when we talk about credentialing, which is they pay full freight and they don't always go to the actual university. The universities have set up these parallel universities with different criteria, which is very interesting. Yeah, that's right. And this actually turns out be very important to the economics of these places because it's not clear that these places work without these kind of, let's just say, associated programs we'll talk about.

Number eight, sports league, and I'm not the sports guy, but Ben very much is. And so Ben will weigh in very heavily on that. And there's been a lot of controversy around college sports in recent years. Number nine, the hedge fund, which is to say the endowments, which would become a very big deal over the last 30 years in particular. Number 10, what I refer to, and I went to college. So this was me, as I referred as adult daycare or young adult daycare. And so this is sort of where you send their 18 to 24 year old as sort of a substitution for just like going out and getting a job. Yeah, to get them out of us.

Exactly. Exactly. And then number 11 is what I call the dating site, right, which is the role that the universities have played, actually both in being a place where people actually date and choose mates, but also, they also get the credential for future choosing a mate. So we'll talk about that because that turns out to actually matter quite a bit. And then we'll close on what I call the lobbying firm, which is basically the role the government plays in all this, and in particular the role that government plays in all this. And then what that means for the relationship of the government and the universities. And of course, that's a very hot topic. There's a very, there's a, there's a, there's a, there's a, there's a, there's a, there's a, there's a, there's a, there's a, there's a, there's a. current, you know, very active congressional investigation going on into the universities right now over all this recent drama. And so there's always this kind of question in the back of everybody's heads in academia, I think, which is like, okay, we really do, we in academia really do run on federal funding and what would it, what would ever happen if that ever got compromised or cut off? Yep. Yeah, no, and it's a freak out whenever it pops up. It popped up a little during the Trump administration. I cannot. I was a trustee at the time. And like it was a fair,

really scary situation. Why don't you describe what happened? Because that gives people a sense of the stakes of what we're talking about. Yeah, so while Trump was talking about a variety of things, one was an endowment tax, and then there were kind of other things to kind of change the way the research grant process worked and the amount of money that got allocated to various schools. And that just has huge effects on the economics.

I mean, it's, you know, universities rarely, you also have to understand, almost never do layoffs, so they only get bigger. And so a kind of, what you wouldn't kind of regard as like a kind of run-of-the-mill business downturn is like something that they're not really equipped to handle at a university. I would just put it that way.

Okay, we'll come back to that. So let's start with a credentialing agency. And so this is a very interesting topic. And actually, a lot of what I know on this, I learn from, there's an economist named Brian Kaplan, who's written a book called, he's a, he's a tenured university professor at George Mason University. He spent his life in academia, so he's not exactly a bomb thrower. But he gave his book a very provocative title called The Case Against Education. But it's a very kind of comprehensive walk through the economics of education and how the system works.

And I was very struck by, I'll just sort of relay the argument that he basically makes in the book, or at least how I interpreted it, which really stuck with me, which is the sort of default view of sort of the value of a college degree is the learning, right? So you go to four years or whatever and you get the learning that you get, and that gives you the learning sort of translates to employable skills, and then you get a job, and employers recruit kind of on that basis, evaluate on that basis. It actually turns out, it's actually very hard to validate empirically the value of the learning. And the reason for that, the evidence for that is there's something called the sheepskin effect that economies talk about, economists talk about. And the way the sheepskin here refers to the

diploma. The actual, right, the actual, actual, you graduated, you actually got the diploma. And the observation is that if you go to college X and program Y and you go for eight, you know, go for four years, you go for eight semesters, say two semesters per year, and you graduate, you make whatever, say you make $100,000 a year or whatever, coming out the other side as an average salary. It turns out if you compare those graduates to students who go for seven of the eight semesters, it turns out like on average is something like, they'll get something like half the salary. Yeah. So for those graduates, they kind of zero in at like if the, if the full, if the full graduate amount is 100,000, they'll come in at like 50,000 or something like that. And it varies by field,

but it kind of roughly correlates to that. And so what the argument I think Brian Caput has made is if you basically, if you look at that, if you stare at that, there are two possible explanations for it, right? Because what you'd expect is if this is just all about the education, the graduate, who the person who didn't graduate, but took seven of the eight semester, should get seven eighth of the income. Yeah. Right. Instead, they get half the income. It's So there's two possible explanations. Either a full half of the actual valuable information is delivered in that last semester.

Yeah. Right? The senioritis semester. Yes. And anybody who's been through college knows that's not true, because that's the semester, everybody slacks off. And so if anything, the opposite is true, or the sheepskin effect, which is the actual value is more in the diploma.

It's more in the fact that you actually graduated, right? And so the way that I think the economist's view on this basically is the main credential of a of a university degree is basically in two parts. It's in the fact that you were admitted, and then it's in the fact that you graduated. By the way, on the admissions thing, you can see that same thing in Silicon Valley, where there's this credential in Silicon Valley

that's become very popular, which is I was admitted to MIT, but I didn't go. Yeah. Right? Or I was admitted, and I went for a year and dropped out. And it turns out, like, there's no penalty, like, for VCs like us. Like, actually, the fact you got admitted MIT is itself or credential, even if you never went, right?

Even if you never actually completed the thing. So it links back to the sheep's skin effect. Anyway, so basically like the sort of objective clinical view of the value of the credential basically is that the education plays some part, but there's these two other really critical things. There's the fact you got admitted and then there's the fact that you graduated.

In psychological testing terms, so what they call psychometrics, what that basically means is that the admissions process is basically an IQ test. Come back to that in a second. And then the graduation actually getting to the diploma is a conscientious test. Right?

And so, and the reason, reason we can be confident in saying that admissions is an IQ test is that traditionally admissions was based on standardized testing, which is like tests like SAT, ACT, G-R-E. And those tests from a, from a, from a, from a, from a just a clinical standpoint, like those, in sort of clinical psychology, psychometrics, those tests are all sort of, those are all sort of roughly equivalent to just a straight IQ test. We're highly correlated to an IQ test, highly correlated to an IQ test. So basically, historically, the fact that somebody got whatever 1,400 or 1,500 on the SAT,

and that correlated to an IQ of 130 or something, and then therefore they were qualified to go to a certain tier of university. Like, as long as that standardized testing components in there, and those tests are real, like that's a real signal of basically intelligence. And then the fact that they completed the four-year degree is a real signal of conscientiousness. And I think there's a really kind of fundamental thing that's breaking right now that's not getting enough attention,

that employers are starting to really think about, I think a lot of people who run universities are not thinking about enough yet, which is... We're thinking about it. We're thinking about it. Yes, both... Yes, we're thinking about this, both for ourselves and then also for all of our companies who hire,

which is, I think a lot... So a lot of universities, number one, they're voluntarily ending the use of standardized testing for admissions. And there's a whole political, social kind of overlay as to why that's happening. But at a lot of even the top institutions now, they very deliberately are not doing admissions based in any sort of standardized testing,

which means they're not applying the IQ test. Which means, which means, by the way, maybe that's the right thing for them to do, but what it means is they're giving up on that as part of the credential. Like that IQ component of the credential is being voluntarily surrendered. And then the other thing that's happening, and this is very clear, the data is just great inflation. And so the trend over the last 50 years has been increasingly that just everybody gets A's and everything. And of course, if you just get A's and everything, of course, it's a lot easier to graduate, right?

You're much less likely to drop out or get forced out. And so I think what's happening is colleges, universities in the U.S. right now are voluntarily surrendering both the admissions IQ component of the credential and the graduation grading component of the credential. And I think the implication of that in terms of what that credential means in terms of future employment is, I think, very underestimated. Yeah.

So, Ben, over to you. Yeah, and what do you think drives the great inflation the most? I've been thinking about that quite a bit. Do you have a view on that from what you saw Columbia? Yeah, I mean, I think that a lot of it has to do with incentives, right? So if you're an instructor, you get, yeah, the big new thing is they have these student evaluations of teachers and they get published in these books. And then you get, if students don't like you, you're regarded as a crap professor or whatever. And the easiest way to get a high student evaluation is to give them an A.

And so like, and the amount of stress and just bullshit that you have to deal with, if you give somebody a D because they're going to come to you and complain and harass you and so forth, like, why do it? You don't have to. So just give everybody an A, you get a high evaluation. So like the incentive, there is no incentive for an instructor to give a hard grade. And then there is a kind of, once one professor starts kind of taking that easy incentive, then everybody kind of does it. And we see this in companies where, you know, you have a sophomore. manager promotes a bum employee, then every manager goes, every other employee goes, well, that bum got to be a vice president, why not me? And then that takes off. So I think it's kind of like

a natural organizational evolution if you don't have some very strict standard on grading. And so like I think it just naturally went there. But I'm not sure. Well, I'll give you two other. I think that's right. And like the role of like, I think it's like rape my professors.com. I think it's like, I think it's like rape my professors.com. I think it's pretty central now. But I give you two other incentives, I think, I would suspect, one is development, donate, future donations, right?

Which is the other constituency here is the parents. Yeah. And then by the way, these students, and then these students later on becoming donors, right? Yeah. And like, I think that the professors, most professors are not that directly connected to the fundraising process, though, I think.

But yeah, that could be certainly. But it also, but here you go to like, here would be a reason for the administration, to not be holding the line on on oh for sure right on yeah angry parents like the last thing you want to deal with is an angry parent who donated a fuck ton of money that's right like that's no fun at all so so in that way definitely the same thing yeah yeah and then the third is look the other version of this i've heard i've heard this from professors is like look if you could you can for bad grades you can be hauled in front of administrative proceedings you can get in trouble right because you can open the

door to fairness right equity classroom conduct yeah the complaints like the the students in their parents can and they can give you a false harassment complaint or something because you can the D, right? Yeah, yeah. Hostile classroom, like, so the HR, the sort of HR policy is basically provide an avenue. And by the way, there's avenue for legitimate complaints, but also if you're a professor, you must, you must be thinking about, boy, what's the last thing I need in my life is to open the door to somebody saying something like that. And so, yeah, I think that's, to me, I think that that's my analysis is just, and then

this is the thing, the great inflation thing. The great inflation thing has been, it's been like a 50-year trend, like the charts there are actually pretty linear. Yeah. And so this is been growing for a long time. People have known about this. And it's just, it's not a problem as long as the credential is still intact. Right.

But I think it's at the point now where I think it's damaging the credential. Right. It's slip, slip, slip all at once. Yeah. And I think that, well, so there's another thing, which I got in a huge kind of argument about when I was a trustee. And to Columbia's credit, they did the right thing in that case. But all of the schools, so there's kind of, whatever,

Harvard College, Columbia College, like these things are almost impossible to get into. They accept on the order of a thousand students a year. Every high school graduate in the world wants one of these slots. They're very hard to get. And that's the credential. But there's also these things, the extension schools, which are not taught by professors. They're taught by, like, whatever, somebody from Goldman Sachs who's wanting to do a little side education work or this and that. And they can let in tons of people. They're far larger than the actual university kind of college program. And they all have them.

Harvard has it, Columbia, et cetera, et cetera. And they are mainly foreign students. So it's mainly like Chinese students. And then they purposely, and this is where I got into the argument, And they purposely labeled the degree, so it's very hard to tell that it's not the credentialed one. So it's Columbia University Masters and Statistics was the big kind of debate that we kind of got into at the Extension School because the people in the engineering school were like, what the hell? Like, that's the same degree that we're giving out in title.

Like, how is an employer going to distinguish? And the truth is the Chinese employer cannot distinguish. Like, that's, like, really hard for them. And so you do that enough. And it ultimately waters down the degree. Now, in the United States, like, we can distinguish, we get a student coming from Harvard. We, like, talk to other Harvard students, make sure they knew them. Like, it's possible to sort, but it's not possible to sort for everybody.

And they're purposely obfuscating it because it's a huge moneymaker. These schools, everybody pays full freight. There is no scholarship. There is no financial aid. There's none of that. And then it's very scalable because they can let in as many students as they want because they're not taught by professors and there's no, none of this credential idea. But it ricochets back into weakening the credential.

Yeah. And a lot of this, you alluded to it, but I'll just focus on it for a second. A lot of this is a lot of these are then international students. Yeah. And the core of a lot of this, as you said, is, yeah, if you're a Chinese employer, you might not understand the gradations here. Now, having said that, Chinese employers can use the internet just like everybody else, or at least in this, I'm sure, for this, for this purpose they can.

And so that's the kind of information asymmetry that the internet historically has been very good at demolishing. Yep. Yeah, yeah. And I think that that is, I mean, which kind of is going to be thematic in this discussion, which is a lot of the things that the university kind of could rely on get undermined by the internet. And that which is causing things to come to a head, I think.

Maybe not right now, but certainly soon. Yeah, coming. And then Ben, on the overall credentialing point, so yeah, what's your view we deal with both a lot of tech companies and also a lot of non-tech, a lot of big non-tech companies also? Like, where are CEOs and hire managers in corporations on this topic of like the value of the university credential now versus 10 years ago? And then where's it going?

It hasn't changed materially yet, in my view. But for the first time in my career, people are really discussing it. And you hear CEOs going, wow, the kids coming out of college this year are not what I'm used to. They're not. And I'm getting kids from weird places, not Harvard, not MIT. Like it used to be in Silicon Valley. I think Facebook, you're on the board of Meta. they used to only hire people from Stanford and MIT, I think, or Harvard, Stanford, MIT.

Like, they had, like, stricker. Nobody has that role anymore. Like, that rule's gone. Like, I don't know any company that you have to be Stanford, Harvard, or MIT to, like, be an engineer there. And more and more people are not finished school, coming straight out of high school. So, so I would say the aperture, which is really great, by the way, has opened. But the other thing is that I am hearing a lot just anecdotally is, you know, Stanford students aren't what they were. Like, I got an engineer from Stanford, but they're not, they're not ready to go in the way they were before. And so I think that it's already, there's definitely a credential degrading that's already occurring with this. first time, though, with this class coming, that just came out. So it's pretty nascent.

And it's not, I don't think it's really changed hiring practices much other than people are casting a wider net. But they're not like still like a Stanford degree is very powerful. But you could kind of see it's like a glimpse of the future for the first time. Like I've never, never heard that before. And if we project forward, if nothing, if current trends continue. Yeah. Like what do you think will be? be the take among sort of leading-edge employers in five years? Well, I think, look, I think if you take

out the SAT, that's a pretty big change. And so it's a little unpredictable because, okay, what are they admitting people based on? Like, you know, do you have to have high scores on the AP exams? Do you have to have a very rigorous curriculum? I know at Columbia, it really mattered the quality of the high school that you went to, even when they had SATs. So the question is, is that whatever rubric of criteria that they're using to replace the SAT as good at identifying very gifted students? Or is it not?

And I think we don't know that yet. Yeah, but like, would you predict in five years that employers are still just basically deferring to the degree, the question of a candidate, of a recruits? IQ and conscientiousness, or are they feel like they're going to have to validate that otherwise? I kind of think they're going to have to validate it. I mean, just because it's different. Yeah.

And on kind of entry-level jobs, you can do some fairly rigorous testing, particularly for an engineer or something like that in the interview process. But, you know, look, Stanford, you had just a huge benefit of the doubt. I mean, look, I think meta at one point took any engineer from Stanford. Well, you know what I mean? Like, because they were hard. It was that good of a signal. Yeah, yeah, it was an amazing signal. So I don't think they'll do that anymore.

I think Google, just to close on this topic, I think Google now formally does not take college degrees into account, or at least they've said their neutral or ambivalent or don't care. They'll equally rank people without degrees. They do their own testing, and they go on those tests. Yeah, yeah, yeah. So I think that's going to become much more of the norm where companies do their own testing. And it won't be, it's not legal, at least for Toronto in California, to do a general IQ test for a specific job. But you can do pretty rigorous job-specific tests that certainly kind of include something that's going to, ability to process information quickly, et cetera, et cetera.

Okay, well, I'm sure, well, this will come back up again. So we'll move to number two. So the actual education, the actual education, the courses themselves. So here I was just saying one lens in this is actually the, again, part of the bundle here, there's actually a bundle of four different kinds of sort of education and coursework, at least four, but I would say there's four big ones. So there's the sort of classy humanities, liberal arts, which, as I said, is sort of derived from the English model.

There's what we now call STEM, science, technology, engineering, math, which is, as we said, originally derived from the German model, and that's physics and everything from physics, to engineering, and so forth. Then there's social sciences, which is a bit more of an American innovation, which was social sciences are like a hybrid of humanities and STEM. And so these are fields like psychology, sociology, economics, public health, education, that were kind of developed as, quote, unquote, sciences. Anything that has science and its name isn't science is the joke, right?

Like, there's no physics science or chemistry science. It's only political science. Yes. So the classic tension is the political scientist, absolutely insist that they're scientists just like the physicists. Yeah. And the physicists insist, no, absolutely you're not. No, you're not.

Because it's not science, right? Like, it's not like I have a hypothesis that's testable. And I can run an experiment and find out if my predictions come true. So if it's not that, it's not science, but whatever. Capital S science. And there's a whole digression we could go on about where this all came from. But yeah, they're in the middle somewhere. And then there's what I would call the trade school,

which is basically law, medicine, business, and performing arts. which is basically like if you go to one of these places for specifically for a law degree, like that's a very specific, obviously. Is that a course a credential or for to become a concert pianist or something like that or a doctor? And so there is this kind of bundle, even within the bundle, overall bundle, there's this bundle within the educational courses component of it, which is these are actually four, I would say, four quite different kinds of curricula.

Yeah. And then that basically takes us to sort of the problem here. So one problem here is the sheepskin effect we already talked about, which is basically at least a very strong suggestion that at least for, at least for some degrees in some institutions, the education is not as important as people might think, or let's just say the market, the market of employer certainly doesn't think it is

because you just look at the compensation data and it shows that. But then there's this other monster problem. And again, this problem has been discussed at length for decades, but it feels like it's also coming to a head here, getting much more politically potent, which is the student loan crisis,

which is you just have a very large number of graduates of American colleges universities where they're carrying these large amounts of student debt. And in the really bad case, it's actually debt because of the high interest rates, it's actually debt that compounds and kind of grows indefinitely over the life of the students. And you can't get rid of it with bankruptcy.

Well, so that, right. Well, so this is very interesting. So on the one hand, there's been this big controversy. There's been a lot of heat around this question politically, which is for a long time, student loan debt, federal student loan debt specifically cannot be discharged to bankruptcy. And it's the one form of debt that can't. On the other hand, though, you now have direct bailouts.

So in the last three years, right, the current U.S. administration has been doing a series of bailouts where they've been doing arbitrary top-down erasure of the debt, which, of course, they call it, they call it forget. They use this very clever word forgiveness, which makes it so wonderful, of course, what it just means is it means other taxpayers, right? Other people are going to put the bill for it. And that's always sensitive in the American system, at least, because, of course, the American polity is composed in part of people who went to college and in part who didn't. And so people who didn't go to college might not be so keen about having their tax money getting used to forgive

student debt for non-productive degrees. And then honestly, there's also a moral hazard issue that comes up, which is among people who took on college debt, there's the people who paid it off versus the people who didn't. They have people who paid it off don't get forgiven. And so then there's this thing, there's this weird incentives thing where it's like, well, okay, if this is the new way that it goes, then I'm a sucker if I pay off my own student loan debt because in the future there'll be another bailout. Yeah. So anyway, so this has become like a pretty potent political issue. But I think underneath this is this question of like, okay, like, are all of these degrees and all of these institutions actually generating graduates who can actually command

market wages that actually make this entire thing, basically economically and politically viable proposition? Yeah, but I think that's the exact. That's the question that is the thing we should be debating because the whole forgiveness thing is insane in the sense that you're not actually addressing the real issue. It's the ultimate bandit. Yes, you're buying votes. Yes, you're giving some people relief. But the fundamental issue is it's now become clear that for a large swath of the population, college is not worth the money. You would not have a college student loan crisis if whatever you paid for college paid you back in the form of a job that was worth far more than the degree. But what's happened is for a huge percentage of the degrees, the degree is worth

less than the job. So it's basically we as a society are running a scam and ripping off a huge percentage of our young people who are going to college with the clear expectation that they're going to get a higher quality job and being able to pay for college. But that's absolutely not the case. And that's the real issue. And if we don't address that, it doesn't, you can forgive this batch, but what about the next batch and the next batch and the next batch and the next batch? It's still not worth the money. And I think that's the great thing that has to be reckoned with. And that's a big, big issue because tuition, the quality degree has got to be pretty hard to pay back $300,000. It's a lot of money for even in today's inflationary world to go make back up,

working for a living, which I think kind of gets into the student customer, right? There's many customers, which will I get into, but like, as a student, what do I want? Well, there are maybe 1% of the students want to become scholars, and then 99% of the student want jobs. And for that set, the value proposition is getting extremely shaky, I think, across the university system, which is why we have the student loan crisis. And there's been an amazing inflation of tuition, which has grown at, I think, tuition rates have grown at two or three times the general inflation rate, which is insane in the face of technology that ought to be

able to reduce the cost of education dramatically, as we've kind of talked about. Like, it's all on the internet and it's all in chat, GPT. There is no knowledge. that you can't just like get from your smartphone very cheaply and easily. And so why am I paying $300,000? And it is for like the credential. But the credential itself, depending what you get your degree in, may not be worth $300,000 at all. And it's clearly not worth $300,000 at all. And that's a big problem. Then I add a couple things to that. So one is this inflation thing, and maybe we can put me post a chart to go with us that shows this. But the cost of the degree rising fast. or that inflation as a continuing process.

And so, and compounding here really gets you, right? And so if you compound forward, like $300,000, $300,000, is like the cost of a four-year private college degree right now in the U.S., but if current trends continue, and there's no reason right now to expect that they won't, that's on its way to a million dollars. Yeah.

And relatively quickly because of the compounding. Even if you work for us, that's hard to pay off. Exactly, exactly. And so, like, there's a, Right now it's a one-way treadmill, and we'll talk later on at the end about the overall fiscal structure of these places. But the financial structures of these places generally assume that this kind of sort of superinflation of costs is going to continue, and they're building cost structures that kind of assume that. Yeah.

And that's starting to show up, right, that's starting to show up in the application rates of the kind of percentage of kids applying to school already, I think. So then this also goes to this thing, and I've been guilty of this already. it's just so easy to do, which is it's so easy to talk about whether kids should go to college or not. And then whether kids should get a degree or not. But of course, underneath both of those is like which college and then which degree, right? And if you dig into each of those, if you dig into which college, of course, there's a tiering in the college system where there's four or five, six different tiers of institutional quality and quality of the credential and then corresponding income job offers coming out the other side. and then degrees, as I was kind of walking through, a computer science degree and an English degree.

And like they just, the English degree may be as like spiritually valuable as the computer science degree, but it just doesn't carry the same economic kind of opportunity out the other side. And those are two very different financial propositions as a consequence. And they cost the exact same amount. They, which is part of the weird thing. And it also gets into, again, to the customer question,

One of the very interesting things for me and being involved in universities about that Columbia and UCLA is that the way that the slots got allocated. So the demand for computer science degrees is extremely high compared to the demand for, you name it, anything that ends in studies degrees. But that's not how the resources at an university get allocated necessarily. They get allocated based on this, and it's sort of a function of the way they're run, but there's the student demand thing, but a lot of it is fundraising. Can you get an alumni to give you, like, grant you a professorship or whatever? And then can you politic your way into more resources within the university system, which is at that level extremely political and who gets what?

And so you end up with generally a shortage of engineering slots and a plethora of other slots. So now you want to go to Harvard, but you can't or you want to go to particularly like UC Berkeley or UCLA, the public schools. You want a computer science degree. You can't get into computer science, but you can get into Berkeley. But you've got to pay the same amount. And this is where it gets really wacky. Yeah. So I think there's pressure building, and we could spend a lot longer on this topic.

but I think there's pressure building to kind of disaggregate the question of college into like what tier of college. And then I think there's going to be growing pressure to disaggregate, okay, what exact kind of degree? And there's really a matrix. That's really a two-dimensional matrix there. And the economics of both the student view on this as well as the institutional view on this actually vary a lot, depending on where you land in that two-dimensional matrix. And that's not generally how this stuff is discussed or analyzed. It really gets to, you've got a huge bundle that you provide to a huge. Very diverse, weird set of customers.

Not diverse rationally, but you have to satisfy students, donors, faculty, sports fans, everybody. And so it's a pretty hard product to build. Yeah. And then some state systems have started to carve back on some of the degree. They're starting to cancel some of the degree programs that they think don't pay off economically. And that's been contrary. In those states, I know that's been controversial because, of course, that's going to tend to hit humanities, liberal arts the hardest.

Yeah, yeah. And then that becomes very controversial, which is are these institutions walking away from kind of their core education mission if they're only focused on the economics. And so I think there's a lot of potential future pressure here. Yeah, and I think that's kind of a little bit what is the purpose of the university, right?

So through the lens of the student, they really want a job. And if they're going to fork over that kind of money, they really need to get a job. Whereas, like, if the university was free, then it would be a different story. And then what is its function in society? and to build the right morals to well-rounded people, all these kinds of things come up.

And there's been a lot of criticism of us in our world that were not well-rounded enough in this kind of thing, right? Like, that's been a pretty steady criticism from the press that if we had majored in humanities, then we would have designed social networks in particular to be better. Not sure about that, but that's a criticism anyhow. Yes, exactly. I will not take the bait.

Okay, number three, number three, research bureau. So, and this is sort of the research, this is sort of the research that's done. And again, here there's sort of a tiering or there's a set of different things, but this is the sort of university level research that happens for sure in the hard sciences, but like physics and chemistry and math,

and then also computer science, then also in the social sciences, and the social sciences, whether the physicists would agree with it or not, the social science scientists think that they're doing the same kind of research. And then even in the humanities, that same research approach.

That same, the humanities professors, grad students, write papers and publish in journals and get evaluated in a very similar way. So that same kind of, at least the workflow in form of the product is basically the same. This concept of the research university, like I said, is somewhat derived from the German model,

but particularly the American Research University is heavily based on the thinking of a guy named Vannevar Bush, who was famously FDR. He was actually a character in Oppenheimer. Matthew Modin, I think, played him. He was FDR. science advisor, and he was sort of the FDR's main guy at the level of the federal government overseeing the Manhattan Project and science policy in the U.S. And then he basically, he and his

kind of colleagues basically designed the modern research university, as we understand it today, coming out of 1945, and created the sort of modern federal funding complex of things like the National Science Foundation, National Institute of Health, DARPA, and so forth for funding research. Yeah, and those are very important. We need to get into that because that's corrupted some things itself. Exactly. So the sort of the sort of way I think of looking at sort of how is this going, because this is so central to the model, is right now globally, there are three million published academic papers a year. How many are read? This is the thing. So three million and specifically published in journals, right? And so these aren't like PDFs on the internet. These are like

published in journals. Right. So they go through an editorial process, a peer review process. Like they go through that full process. American universities famously have this process for new professors I call publisher parish. You start out as a sister professor, a full professor tenure, and then at some point, maybe an endowed chair. And the way that you kind of climb the ladder as professor is through your research. And the way that you demonstrate your research is by publishing papers. And so if you talk to professors, actually, they complain about this a lot, which is there's just a lot of pressure to publish papers, whether there's anything actually meaningful in them or not is sort of secondary. And again, this is their complaint. And then there's this question of like,

okay, like, where are the results, right? Like, how do we score? This is like, if you chart, like, the number of papers per year over the last 50 years, it's one of these lines that's like straight up to the right are the results up into the right. And there have been lots of studies over the years. Robert Gordon is an American economist, the famous he wrote this big book about this, that basically says that the actual amount of scientific progress coming out of that, if you try to measure that is basically like flat and maybe down. And so it seems like there's some divergence that's taking place there. There's a couple of ways to think about that. One is there's what's called the replication crisis, and this kicked off in, I think, 2005,

when a Stanford professor named John Ionitis wrote a now-famous paper with the title, half of all published research results are wrong, where he did a statistical analysis and basically asserted that claim. There have now been extensive replication studies in many fields, and it varies by field, but somewhere between, like, a third to, on the low end, like, you know, a quarter to a third on the high end, like up to two-thirds or three-quarters of all published research, doesn't replicate, which is to say if you run the same experiment again, you don't validate the results. And so there seems to be like an actual quality control issue, which we can talk about.

Then there's the impact question, Ben, that you brought up, which is how often are these papers cited? And then you can do citation counts, and it turns out most papers are never cited. And then you can also do readership counts, like library lookups, journal lookups. And it turns out that, like, it's like, I don't know, half the papers are never even read. And then you've got this additional problem, and this is where things get controversial, but look, you have a lot of published journal articles these days that are, for example, in this category they call auto ethnography, which is basically people talking about their own opinions on things and sort of observing themselves as like subjects.

And this is a lot of the research that happens in the sort of humanities and liberal arts these days. And those papers, you could have an opinion of them, which is just like, wow, this just seems like sort of naval gazing, not that there's nothing really used. I was like, I have an opinion, you have an opinion, let's both. writer opinions, right, and publish them and call them papers. But these also, the reason I bring this up is not just to pick on them, it also just turns out they have like basically, they generally have zero future citations.

And so they're not cited by anybody else. They're not, they're not, there may be something brilliant in them, but they're not leading anything. They're not adding to the knowledge of the world, right? Right. If they were being read and cited, that would be a good sign, but they're not in a lot of cases being read and cited. You and I both know people who have come out of the university system who would express this

quite strongly, which is like, it does. appears that there is some sort of crisis going on, which is basically the, there's something broken in the research engine, not in the process, but in the outcome. And in particular, the replication crisis at the heart of it, like, if the science doesn't replicate, it's not science, like it's not real, like something, you know, something else happened along the way. And then that opens the door to like, well, was this, no, you know, there are, look, there have been cases of overt fraud. There have been, you know, criminal cases that have flowed from this where it turned out that people were deliberately lying. In a lot of cases, it appears they're not lying. Maybe they just, like,

don't realize that they're publishing fluke results. Anyway, like, I'll just say this. There's been a 20, coming up in 20 years now of debate in the scientific community as to what's going on here. And so, yeah, let's pause on this topic because it's so central to the mission of the modern university. On the negative side, the other problem is that government funding

turns out to be highly corrupting because what happens is the way the funding works is there's a panel of government bureaucrats that takes proposals for, research and then approves them. And like as venture capitalist, that's not going to lead to anything good because they're basically only funding ideas that they understand, which are very, very incremental, shallow, uninteresting things to research as opposed to real breakthroughs. And I'm I know this very well because I'm on the board of Picey, which is Sean Parker's Cancer Institute.

and we've adopted the model of the Howard Hughes Medical Institute, which also funds research, and we pick researchers. So, you know, it's like picking an entrepreneur, pick the smartest researcher and fund them to do their work as opposed to because science is not, I'm going to do this and I do this, it's I'm going to go explore this problem, and I may discover something.

And that's how everything's been discovered. You never kind of do what you set out to do. And so the whole government funding, process is incredibly corrupting and bad and massive and drive so much of the research that's done in universities because it's a gigantic. It's like a gusher of cash. So it cannot be resisted, but it's set up in a very horrible way. So that's a problem. I will say like we, I mean, we should state that we have funded many things that have emerged from universities. And we've funded a company doing CRISPR from the kind of inventor of CRISPR. We've

funded data bricks out of Berkeley, which was research done on computer science and scalable systems in their BASIS, in their AMP lab. We discovered, funded any scale, which is out of the Basis Lab. We funded Martine out of the Stanford out of Nick McEwen's lab. And so like obviously our money is where our mouth is and there's some very good things coming out of university still. Like a really important breakthrough research technologies, things that save lives. So it's not a zero. I just want to like make sure that we're clear on that. I think that it's massively inefficient. A lot of the research is completely useless. A lot of the fields that are being researched are completely useless. But I do think on this one, there are so many genius scientists

in universities that we we have to be kind of careful to, you know, as a society, ship the money to funding the people who really need, whose research we really need, and away from this just wasteland of ridiculousness. Good. Okay. Let's tie that off for the moment. And then let's go to number four. So number four, policy think tank.

So this is a very interesting thing that happened. This started about 100 years ago. So Woodrow Wilson idea, right? Yeah, it's a Wilson-era thing. Almost exactly 100 years ago is when this started. And in particular, there's a book called Public Opinion written by again and Walter Lippman. that sort of define this at the time what I'm about to describe. And so I was just like introduce a topic by saying the following,

which is today it's just like totally normal to like read in the newspaper that like there's some social issue, a poverty or something, something, health or something, right? And then they will quote in the newspaper experts in that field. And those experts by definition are, well, they're university professors, right? By default, those are always university professors. And so the professors are kind of the Oracle of Wisdom in that, in that area. And then the media, so basically the media picks up the expertise from the expert

professors out of the universities. And then the politicians basically receive that through the media. And then the politicians, basically, that's the content for the proposals that the politicians take forward. Like that's where the proposals come from. And then when you're trying to pass the law, you're like, well, this is based on research. Like, this isn't just like my opinion. This is based on like research that took place in the whatever political, such and such and such, health policy department at Harvard or whatever it is, right? And so it's validated. Now, if you go back historically, like, prior to about 1920, this was not how things worked.

Like, in, like, 1850, if somebody's trying to pass a law or something, they're not quoting a professor, if you quote a professor, it'd be like quoting a, like, it would have been very incongruous, like kind of thing. It's just not something people would have done. It's crazy. Yeah. Like random, yeah, some like some random person, right? But basically, so what Walter Lippman did in this book is he basically, the claim at the time basically was. And I think, look, I think this made some sense at least at the time, was. was basically in the old world, like, systems, societies were simpler.

Everything was smaller. Countries were smaller. Pre-earlier, you didn't have modern technology. Governments were smaller, yeah. Governments were smaller. And you didn't have all these systems. You didn't have like, you didn't have modern, you didn't have fully modern developed economies.

You didn't have like healthcare systems. You didn't have all these systems that got built. These systems kind of got built between like 1880 to 1920 in a lot of cases. You didn't do everything, mass media and mass manufacturing and all these big systems. And so basically what he said was, like, look, like the modern policy issues are now more complicated than normal people can understand. And so there's just no normal person, in particular, there's no normal voter in their day-to-day life who's going to be able to have like a coherent opinion on like healthcare policy.

And so he's like, basically, we need essentially a priestly class of secular experts who actually have full-time skills, knowledge, bandwidth to be able to do all the work to understand these issues and then make the recommendations to the politicians. And then the politicians, basically, their job is to sell that to the public. And he said, basically, that will be a superior method of governance than letting actually voters decide anything. You could make a steelman argument to say that that worked really well at that time, because if you had like super smart people in these various positions, and maybe it's better.

Well, so there's an interesting question, right? There's a lot of dispute over even what happened. That idea was immediately followed by the Great Depression. I'll just point out. The Great Depression, exactly, in World War II. Right. So, yeah, exactly, right? And so there's like a historical debate about whether that worked then.

But then there's a pressing debate as to whether that's working today. And I would just say that like there's just a very obvious kind of flaw in that logic today, which is it's an empirical observation that the faculty at American universities is now radically polarized in one political direction. Radically. And we can also post a graph on this maybe, which is the numbers are like really radical. There's fields in which it's like 30 to one liberals to conservatives or 50 to one or 100 to one, right? And then basically it's just kind empirically in the data. The idea of having conservative faculty these places is basically no longer the case.

They can't get hired. They can't get promoted. They can't get tenure. And so increasingly, the policy recommendations coming out of the policy think tank components these universities are very sharply partisan and extreme. And look, if you're on that side, you're obviously in favor of that. But it's just, it's hard to believe that therefore the universities will continue to be accepted by the political process writ large as the advisors in the way that they have in the past.

Yeah, no, and also, well, this kind of brings up, like, interestingly, I hate to get into today's politics, but the Roland Friar case, right, where here we have probably one of the most important issues of, you know, our generation, which is this whole question of police brutality and how does race play into that and so forth. And literally one professor in the country did definitive research, and not just April. professor, but, you know, I think one that most people in the field regard as a true genius of the field. And I've had an exceptionally hard worker who ran a great lab and all that kind of thing. And also happened to be black. And was black, so kind of credible on that front. And he came to some very interesting definitive conclusions, or like conclusions that I think were important because, you know, they got to, like, what is the root cause, right? Like, what is the root cause of the problem? And he got basically steamrolled by the politics at Harvard. And by the way, then what happened subsequently is his recommendation or his kind of ideas

were not taken by society. What was taken were people who were kind of, who did far worse or no research, but were experts. And kind of the result was the defunded the police movement and the subsequent radical increase in murders of black people over the last two years, which is probably the greatest domestic tragedy that we've had. And that's what the system put out. So I think to your point, the truth can't come out,

or like the truth is somewhat illegal in the current university policy system, depending on what it is. And not all truths are illegal, but some truths are legal. are way illegal. And the consequences are dire. And like it's something that I is very personal to me, but I think this said,

this just happens to be one of the more visible kind of times the system failed, but I'm quite sure it fails in other cases that are just as important. Yeah. And I'll talk about this at the end, but if you look at the, if you look at trust ratings, Gallup does trust survey of American voting population, the view of universities. and the numbers are, I'll talk about this, yeah, the numbers are in collapse.

But in particular, the numbers are in collapse among people on the right. And again, if you're like on the left, you're like, okay, that's fine, it doesn't matter. But it turns out people on the right also vote, they're also a big part of the tax base. And if the system loses credibility among half the population, half the voter base, it's hard to see how there will be continued political support for the level of funding that currently exists. Yeah, yeah, yeah, no, I think. Yep. So definitely a big problem.

But I would just say again, like there's obviously great research going on in universities, which is a huge asset to the country and ought to inform the great research ought to inform policy. And so we do have to be careful with the baby in the bathwater on this one because there's not really another set of institutions. There's not another set of institutions that does this kind of work. So then I'm going to bundle the next two together. So moral instruction and then I'm just going to go straight. to a social reformer. So I would say moral instruction is, like I said, there's this historical role that a lot of university, a lot of American universities started actually as religious kind of moral

institutions. They're not formally religious institutions today, but they maintain sort of a moral instruction role. And then they're what I call the social reformer. And social reformer is sort of the implementation of the moral instruction. So they take a step back past simply having an opinion about the ordering society. They're actually taking actions to try to change the ordering of society. And in particular, this, of course, the hot topic here is DEI. And of course, DEI is a very hot political topic right now for two reasons. One is the massive controversy over the Supreme Court case on admissions and the use of diversity or adversity kind of scores and DEI programs generally, legal challenges on those. And there's going to be more cases like that coming up. And then the other is this current kind of crisis, obviously, about kind of the more recent events. But I am going to, I'm, Ben, knows far more about this stuff than I do. So Ben, why don't we? Yeah, let's talk about what you think is most important here. Well, so like just kind of starting with morality. One thing about humans is morality is morality is complicated, very complicated, and it's complicated at different scales of society. It changes and these kinds of things. And so I think Lindy's strong moral values are actually like fairly important, which is why the Bible gets a lot of criticism like these days mainly for things that they said in those days, particularly about like, various topics that we've changed our minds on since. But, like, in totality for something that's

that old, and it's the same for the Quran, like, it did get a lot right, and that stood the test of thousands of years. And so now we're kind of inventing morality as we go. And I would just say what happens when it becomes a moral issue is you can't debate it. Right. Like, this was a problem with the Bible, too, right? Like, you can't debate what's in the Bible. It's what God said, like, what are you talking about? Like, shut the F up. And I think that these new moral issues are also hard to debate for many reasons. And on DEI, let me just kind of talk through where that gets problematic.

So it's very hard for people to question any of the DEI or orthodoxy because you get not of being an apostate or blasphemous, but of being racist or sexist. And that's probably in modern society, I'd say worse than being an apostate or, are blasphemous. And so people don't really think about how the systems around that work. And just to give you an example, so you kind of have to think about DEI, like if you're an employer and you're trying to hire the best, most talented workforce possible, what are your assumptions about your DEI program that you go into it? And this is something is that, I've studied extremely hard in my life and my career.

And what we implemented at the firm, nothing on this kind of thing is anywhere near perfect. But look, we're the most, like, fact, most diverse venture capital firm in the world. And we know this from Maxine Waters, who requested all the diversity numbers and basically played that back to us. And we're a large scale, 550 people, so it's diverse. We, as do not have a head of DEI and so forth. and it's because we start from a different assumption than these D.I.E.I. programs start from, and ironically, the assumption that we start from

is the non-racist, non-sexist assumption, which is we believe the talent is out there. And if you believe the talent is, there is talent in the world that is in kind of different categories, then the approach you take to the system is basically threefold. One is, you have to have, the right criteria for the various jobs, which means that we're not, I think Kara Switzer had this thing, the metacracy. Well, like you and I don't hire ourselves for every job because, one, like,

we're not that great at networking. And like we have a firm that, like, its whole business is networking. And we hire people for that. And that's a very different criteria than, like, something that we would just, like, replicate ourselves on. Secondly, from a recruiting standpoint, you need to go far and wide and find the best talent. Like, if you look in the exact same place, if you hire everybody, you're going to get the same kind of people. So you have to kind of expand the scope of like where are you going to go find the talent. And then the third thing that you have to do is you have to create a work environment where, and this is where the universities go horribly wrong. That's great for people to work who are from different backgrounds.

Like, that's kind of how you would design the system. And that's sort of how we've designed our system. And when we think about the diversity in Andresen Horowitz, we never think of it in terms of, oh, this person is as good as the white man who would do the job, right? We think of, there's no white man that could do that job, like, that could have built a cultural leadership fund. Like, that's not even possible. And so that's, it's a very different lens. But it starts from a belief that talent,

that I need is out there and in like different populations. If you, on the other hand, took the assumption that the talent is not there, you'd do exactly what the universities do. And I know this from there, the way they hire their faculty is, what would you do? You'd make race and gender explicit criteria. So two things that objectively have nothing to do

with the actual job that you're hiring for, but are substitutes for the fact that you don't believe the talent is there. And that's what they do. And then what is the side effect of that? And the side effect of that, and this is what's happened in all the universities, is if I am the whatever diverse candidate I am,

the woman professor, the black professor, Hispanic professor, as soon as I get there, everybody knows what our process was, what our hiring criteria was, and I'm a second-class citizen. And that's the worst fucking shit. And so then the retention is bad. And like I saw this at Columbia,

like the retention is terrible, for all your diverse hires. It's way worse than your retention for your regular hires. And then how do you fix that? More racism. So then you go, well, like, we need to make it, we need to start not bringing in anybody who's not of this criteria and that kind of thing. And then you're just in this weird degenerate state based on a morality that you weren't allowed to discuss. And so because, like, luckily, because I run the firm, I discuss it with you, we can. can get around that and we can do things. But like they're all starting from like a racist, sexist set of assumptions that like the only way to bring in diverse people is to make race

and gender criteria, which by the way isn't true. And it's objectively not true because they're like, I mean, we're 550 people more than half our women. You and I are the founders. We're like white men. Jewish does not count as not white. But like we just had the right criteria. We were very, very careful on our criteria for the job. We had many things in the criteria that we don't have. We have a whole process for generating criteria that basically aims to make sure that we can find the best talent wherever it is. And then we go get that talent.

And then because everybody in the firm is hired in any given position on the exact same criteria, we have no retention problems among like any of our kind of various people we have here. And like we're just all A16 Zers. We're not like the, we don't have ERG groups who are needing it. Like that's not a thing. And so, in a long, long way of saying, if you can't discuss it, you can't design the right program. And this is the whole problem with morality, right? Like, if morality becomes religion, you just have to have faith in the doctrine.

But this doctrine was invented by, like, a bunch of people who just made the shit up, like, two weeks ago, not people from 2,000 years ago who have stood the test of time, right? And, like, that whole doctrine in the Bible lasted many years before they ever read it down. And so it had kind of, they only wrote down what they could remember that worked. And so, like, that's why it works. And, like, we don't have that process now. and it's a huge, I think it's a huge problem. And I think that has to do with like every moral position in the university,

which is, and it becomes very quickly indefensible, which is what's happening right now. Yeah. So as everybody knows, so this is now a hot time. The sort of set of trends that you're discussing have been building growing for a long time. Like some of these programs were created as far back as the 1960s, and they've been kind of escalating and evolving over the course of even longer than actually you and I have been alive in some cases.

And then the last 10 years, intensified tremendously. And then just in the last like three months, all of a sudden there's this kind of moment where at least some people are kind of throwing up a flag and saying, okay, it's time to like rethink this. Yeah. What's your, do you, especially based on your experience kind of being inside the tent at one of these places in the past, like what? Do you have like a prognosis of the next couple years of like, you know, lip service and then more of the same? Or like, is this the opportunity for rethinking? So to rethink it requires real leadership. Even in our firm, like it's a, it's a, important, like I always keep explaining it because it's so important and it's so different.

And look, we own the firm. Like nobody can fire me, nobody can fire you. It's much harder. You come in as a president of a university. First of all, you can get a vote of no confidence from the faculty. You can get fired by the trustees. So there's a lot of ways you can lose your job. They're very fucking prestigious, cushy jobs. Nobody wants to lose them. And so the level of leadership and risk that you'd have to take to overturn essentially the current university religion, I think, is pretty risky. And people have seen people like Larry Summers famously got fired from Harvard for questioning the religion. And like not even questioning the religion, right? He just made a statement that said, well, like if you look at the data, this is what it says.

So that could be a possible explanation. I think it was something along those lines, but he got fired. And so I think it's pretty hard to change unless public sentiment really, really swings on it. I don't know. Like I think it would be very hard for Columbia to change on that front. It's a great university, but like when I was there, I brought it up. I was like, look, can we start with, like, I remember the conversation at the Board of Trustees. I was like, can we start with the fact that we have a bad attrition problem among our black faculty that we hire?

Like, don't we think that's a problem? Like, before we figure out how to recruit the next one, shouldn't this be a good place to work for the fucking last one? Like, why don't we start there? And how do we get to that? And it was, they shut me down. And I shouldn't say they, it's 24 people and so forth. But the leadership was like, shut the fuck up. Like you're going, you're so far outside the religion that, like, we can't even hear a word you're saying.

And that was one of my kind of points of high frustration there, but like it's really hard. It's a big system. And everybody believes one thing. And it's been drilled into them. And look, there's a lot of literature on it and there's and so forth. It's hard to be a systems thinker if you haven't designed large systems, if you haven't run large systems. And you haven't dealt with the consequences of them being wrong. And I think that that's one of my biggest lessons in life

is that if you're not a practitioner in that, and not just designing and running a system, but dealing with the consequence of it, then you're never going to face that fucking reality. Yeah, yeah, that makes sense. And then there's going to be just one final note would be, this is, let me look, Harvard ruled, Harvard ruled against the use of race and admissions,

but they did open the door to the use of so-called adversity. So the diversity programs are, in some cases, illegal now. The adversity programs are being created to replace them. Yeah, the admission thing is a whole right another world than the kind of hiring one. And one that I have to say I'm not as familiar with, but other than reading the Supreme Court cases and so forth, because the trustees weren't really involved in admissions. So I would just say university admissions are pretty weird. you know, from my reading in it, like, that's one of the things.

I mean, the other one that's really interesting is, which I think is misconstrued or misunderstood is this legacy thing. Because people think, well, if you're a legacy, you get it. It's not being a legacy, it's being a giant donor. And you're really a giant donor if you're, those tend to be legacies. But that's really what it is. They kind of obfuscate it. And the universities do this by calling it like, oh, we have this.

many legacy. They're not legacies there, like people who gave them 10 million. I think that's the price, $10 million to get your kid into Harvard, or maybe it's $20 million now. It's inflation. And it's a pretty big percentage of the students because it's not that big a class, right? A thousand students and who are your giant donors? All of 100% of the giant owners get their kids in. And so that's a real knock on the merit. And then if you then add in the adversity program and so forth, like eventually the people who objectively would qualify in, there's not many. There's eight slots for them.

And everything else is like some kind of like weird thing. And that back to your original point or the original discussion is like, well, what does that due to the credential? Like the original Harvard students made a lot of money. and so you have this huge donor base, but then does that corrupt the ability for the NECSET to make money by destroying the credential?

Yeah, yeah, yeah. And then by the way, are you selling a bill, are you effectively, have you ended up as a position where you're selling a bill of goods to the new students, promising them that they're going to be valued that way, and then it turns out,

employers are going to figure this out or are figuring out in real time, right? And you already have that problem in many schools, right, where the degree is not worth the money. We're a student loan crisis and all this thing, and then you're going to really write,

exacerbate it. Okay, good. I'm going to skip, I was trying to pick up the pace here a little bit to close it out. I'm going to skip immigration agency because we talked about that. Sports League, let's spend a moment on that because that's a, there was a sports has become such an integral part of how a lot of these places operate and part of the financial structure. And then I'm not a sports guy, but I've been following there's sort of, it seems to be recurring, I don't know, it might say both tension and scandals around compensation for student athletes and in the recruiting process. Yeah, well, it's changed too recently. So, so like historically, so it started out. very innocently.

Your university, you have sports, athletics, I think is a kind of great part of the well-rounded education. It kind of goes back traditionally all the way to the Greeks, I imagine. And then it's a great experience to play college. And it's amazing, like if you look at the donors, by the way, this is another thing I know from being a trustee. A crazy percentage of the donors are people who play college athletics at the school. also is like really the people who have the most school spirit are the athletes by far,

like not even close. And so it's like a really kind of important component of the university historically. But what happened is professional sports then emerged kind of after college sports. And then college sports became feeders to the professional sports. And then college sports basically became professional sports themselves. So college football. television ratings are much higher than NBA ratings for any given games. So it's that big. And then the coaches, right, it's not like, and they call it amateur athletics, whatever, but the coaches,

like Jim Harbaugh just won the whatever national, he makes like $10 million a year. So, like, that's not a university salary. That's like a professional football salary. That's as much as any professional coach makes. So then the athletes get paid nothing. Okay, but they're students, right? Well, they're not students because to play at Michigan or Alabama or any of these schools, practice is 40 hours a week. So when the hell are you studying? That's a great question. And you're practice in games and travel and the whole thing. And so you've got this, obviously you're running out of the back door. And out of the backyard, you've got a professional, like a major professional sports league where you're using essentially slave labor. Like you're giving them free tuition,

some of them. But like, and they're taking great, like, health risk and so forth. So like that, that just became a whole issue. And then in California, they, so a couple of things happened. They kind of made legal, I think, first in California, now nationally, this name and likeness thing. So it used to be the colleges won't let you sell your name and likeness. Like, they could sell it. They could sell your, you can sell your jersey. And so that changed. So some of the very, very top guys, the most famous college athletes,

which is a tiny handful of the whole population, make a lot of money now. Or like real money, like good compensation. And then in college football, they have this thing called the portal, which you can sign up for and you can just transfer schools, like trade yourself to another team. Like, whenever you want, or once a year, whatever. And so it's fully professional sports. There's no hiding it.

You've got some guys getting paid. You've got transfer portal and so forth. But not everybody gets paid. A lot of them don't get paid. And it seems really unfair, right? Like there are labor laws in the United States of America. And then there's also you ought to be able to bid for salaries on athletes because anything else is pretty un-American, right?

You can't restrict somebody from getting a job. It's clearly a job. It's not an education. And there's little schools. I mean, Columbia football is not like that. It's more like high school football. But, you know, for sure, University of Michigan, Alabama, Georgia, like, these are professional programs.

And so what do you do about that? Do you actually share the money with the student athletes who are your employees, or do you continue to run this essentially a scam and have them play? great injury risk, put in a huge amount of time, make you a ton of money and keep going. So it's certainly coming to a head now. And it's fair to say that the revenue from these programs is substantial as a percentage of the operating budget.

Oh, yeah, yeah, yeah. Like it pays football, football basically. I think the economics are football pays for every other sport. And then so. Yeah. The big schools. And so if, like, for example, if I, not that this would happen per se,

but just illustrated, if a law were passed, that universities didn't have sports programs anymore, they would lose some significant percentage of their budget. Yeah, yeah, yeah, particularly at the big schools. And alumni donations. So a big part of alumni donations is for sports, as you know. Right, right.

Your father-in-law was a huge booster supporter of Stanford, and the sports program's there, right? And sports is very attached to it. And by the way, really great example. He was a great college athlete at Stanford. Stanford gave him that scholarship. He always felt tremendous loyalty to the school. There's very people who aren't athletes that feel that loyalty.

So it's a tricky problem because it's not just the economics from the football revenue. It's the economics from the donations that the football generates, both from alumni who want that program to be good because they went there and they played for that team. I'm going to skip the, just got to come over a little bit. I was skip the hedge fund. Spend a moment on adult daycare. So I just highlight a couple of things in the adult daycare theme.

So just maybe everybody knows this, but I just, from where I grew up, it's just kind of very clear. There's two very different younger adult experiences for people in the U.S. There's the go to college and be in a college campus environment between the ages of like 18 to 22

or even 18 to 24 and kind of be in this kind of not quite adult. It's like a supervised environment. There's a lot of things taking care of for you. So there's sort of, it's not the real world. And then there's just this totally different experience that people in middle, middle, lower, middle class or lower class have, they just don't do that. And so you're 18 and you get a job.

And like, you get an apartment and like you're in like real life. And so there's this big discrepancy. And of course, the lucky kids are the fortunate ones or the ones who go through the college part. They just have a completely different. And I tell you much more pleasurable experience for the course of that than just going to work, right? In part because of the jobs that you get. Like if it gets because of the credential, if you don't go to college, the job isn't even as good. and so you have to start working sooner

and the job business good, right? Yeah, you're doing something hard. Yeah, you're out in the heat. It's like, you know, real life. And then like a lot of people have observed and we hear this, you mentioned we hear this from employers, but like a lot of people have observed that like there is something happening. There's an entitlement, indulgence culture that has gotten very intense

that a lot of people are experiencing from graduates. And that's probably been the case for a long time. And we're probably, you and I are probably examples of it at one point in our lives. But like it seems like it's gotten much worse. in the last decade. Jonathan Haidt has written about this at length, who's a professor, I think at NYU, studies this issue, and he's a psychologist, and he, the way he describes it is he says basically the way that these environments are run now, he refers to it as reverse CBT, which is sort of reverse cognitive behavioral therapy. And so what he says, yeah,

I'll spend a moment on that. So what he says is cognitive, so cognitive behavioral therapy, CBT is the one form of therapy that clinically replicates. So it's the one form of therapy that will reliably make people feel like basically function better psychologically. And, and, and, and, And it basically, it's essentially applied stoicism. It's basically taking responsibility for your own life. And so it's basically getting you out of the mindset of blaming other people for your problems and more into the mindset of taking charge of your own life and figuring out how to process through your issues and focus on outcomes. And so he says the culture at universities now in a lot of cases, especially for undergrads, is what he calls reverse CBT,

which is teaching you that basically you're a victim and you're oppressed. And if anything bad happens to you, it's somebody else's fault, right? it's systemic oppression, right, or it's bias, it's this or that or it's you're in the wrong group. Microaggressions or whatever. It's this entire cluster of basically things that have people basically convinced that they basically don't have control, right? That basically life is out of their control.

And then he points to this like rapid escalation and reported rates of like reported mental illness and reported basically like need for therapy, mental illness, mental health services. And so he basically says something is going very wrong. And then you also have these recurring scandals happening on campus with what you might call the do-it-yourself on-campus justice system, right? Which is if you don't go to college and you're 19 and you get accused of sexual assault, like you're dealing with the police. If you're 19 on campus and you get accused of sexual assault, you're dealing with basically campus HR. Yeah, yeah. And the university is actually required to adjudicate rape.

Yes, correct. So, yeah. So basically Title IX, Department of Education requires universities to adjudicate rape cases on campus and other forms of potential. alleged offenses like that. But no university has its own court system. Yeah, we like fucking try and make it up as we go. Yeah, it's, it's not good. So there's no, there's no, there's not even a formal answer. So therefore there's no guarantee to due process. There's no objective standard of evidence. There's no lawyers. There's no defense. You don't have a, you don't have a right to an attorney. And so there have been kind of recurring scandals in lots of different directions on this.

And so, so there's this hot house kind of psychological legal HR environment that's been created that again, just according to objective metrics of things like reports of mental distress, seems like it's going very badly sideways. Yes, let me pause there and see what you think. I definitely agree with that. I mean, I think that, and look, the other thing that you have to throw in there is, like, you've got students, no parents, and a lot of alcohol and drugs in college. And so, look, I mean, we know from the work environment, like, that if you want sexual harassment,

like serve a lot of alcohol at company events, right? Like, that's the way you get it. And so it's that you just, you create an environment with like drinking and drugs where you actually do have, like, no matter how whatever good the kids are, you just end up with incidents. And then those incidents are adjudicated in some kind of weird kangaroo court. And then all that implies. And then the savvy students can obviously manipulate.

like that system if they wanted to and and and and and so yeah like it that that part although again like it's really tricky because this is in any I think college it's a tiny like percentage of the population that gets involved in that but everybody knows about it so it has an effect yeah well and again just a reason I bring it out it just goes back to the again, once again, it goes back to the credentialing, right? Which is just like, what are you getting? What kind of person, what kind of human being are you getting on the other side of this who's been through a system that sort of,

called case a set of values that result in very high levels of emotional distress? Like, what does that mean for employment, workplace culture? You know, our employer is going to have to, like, screen more aggressively for behavioral characteristics if more and more of the graduating students have, like, experience very high levels of emotional distress kind of going through this process. Yeah, I have heard about that more recently. hiring college grads. I have to say that the college graduates we've hired at the firm.

I haven't seen that at all. I mean, like they're like the young people we have, I think, like, wow, I'd never get a job here. These these kids are so good. So in terms of direct experience, I don't see it yet, but I'm sure it's out there. Or it seems like it's likely. Yeah. Okay. And then I'm going to skip dating site, which is one of my favorite topics, but we will tackle that over time. And we go to the final one, which is lobbying a firm. So let me, Let me outline a bunch of thoughts here and then Ben, I'll get your take. So most importantly, look, everything we've described, the entire bundle runs on taxpayer money.

So, and basically there's multiple streams of taxpayer money, but there's four big ones that I always focus on. So one is federal student loan funding, which is now in the trillions of dollars of subsidies for federal student loans. So in other words, students would not be able to afford anywhere near the level of attendance rates that they have without that program, which is hugely expensive to the taxpayer,

in which now has direct bailouts attached. And so that's a very expensive taxpayer program. Federal research funding, which is very large. And by the way, very significantly, federal research funding isn't just funding for research. The administration takes a rake at these institutions of the research funding that's actually quite large. And so they get a big percentage of it. And so that goes to pay for a lot of administrative expenses and administrator salaries. And then there are two key tax exemptions.

There's a tax exemption at the operating level, which is these are these institutions are nonprofits. And then there's a tax exemption at the endowment level, which is there. their endowments compound on a tax-free basis, like a foundation. And then there's a really critical kind of detail to kind of who gets access to all this, like which institutions get access to all this federal support and all this money. And that's the technical term as accreditation. These are the institutions that have accessed everything I just described are all accredited institutions.

If you dig into the detail of that, there's a very interesting little quirk to it, which is these are institutions accredited by the Department of Education, but the Department of Education, federal Department of Education, does not itself do the accreditation. What it does is it outsources the accreditation to associations, the third-party associations that do the accreditation. And those third-party associations are made up of, and you will never guess universities, right?

And so just as an example, just to pick an example, Harvard, I looked at it up last night. Harvard is accredited by something called the New England Commission on Higher Education. That commission is a nonprofit, which is composed of 200 colleges and universities, such as Harvard. And so that makes it kind of hard to start a new accredited university. Correct.

This is sort of viewing this as a venture capitalist. That's exactly right. Like, could you start a new university and get accredited today? And the answer is almost certainly no. I would get no federal funding. And it would be non-economically viable, right? And then, of course, in economic theory, you have a term for this, which is cartel. And so there's an education cartel in much the same way that there's like an oil cartel or whatever.

So, like, that, that, that, that, that, that, that, that that's the setup. The fiscal situation at these places is actually quite interesting. So we talked already student, the cost, student costs, tuition and everything else, increase much faster than inflation. But these are nonprofits. And so they're not trying to drop money to the bottom line. So instead of what they do is they also inflate their operating costs to go right along with the student costs. And so what they're doing, basically, is they're, because they're able to escalate tuition rate so dramatically,

they can escalate the entire cost base at the equivalent rate. And they're able to, I think it's important to know, they're able to escalate tuition rates so fast because I believe it's in the Obama administration, the federal government, basically said that the government would lend anybody the money to go to college who needed it. So basically, so it's unlimited. The universities just basically raise tuition because you have to go to college. Like it's in the, or it got into the ethos of the culture that you can't. can't get a good job without going to college. So everybody has to go to college.

Everybody can afford college because we'll lend you the money. And so therefore we can charge whatever we want. Yeah. You have an infinite federal, you have multiple trillions of dollars, infinite federal backstop for the student side of it, including now with the bailouts. And so you basically just like you get to write, you get to write these checks to yourself from the taxpayers.

Only for accredited universities. For accredited universities, for the universities that are credit themselves. And then what happens is a lot, if you talk to anybody involved in these places, what you find is that a lot of the expense escalation is not, where the expense escalation is not going is towards taking on more students, right? Or for that matter, taking on more research. Where it's going is to take on more administrators.

And so the sort of administrative component of these places, the sort of bureaucratic structure, like that's where the cost inflation is like really kind of going wild. There are multiple large institutions, too, that have been identified in public, Stanford and Yale that now have more administrative staff than they have. have students. Right. And so, and so, and the joke, the joke at those places is like we could literally replace, we can literally have a personal concierge for every student. And so you're talking tens of thousands of administrators. And again, the administrators are raking funding from every other

part of the complex, everything from sports to research to tuition, everything else. And so anyway, but the point is like the operating cost is escalating. These places are not running on high margins. They're actually spending the money that's coming in. Yeah. And then the endowments, the endowments are big, but they're not that big relative to the expense base, right? And there's only like 10 big endowments in the country, right? And there's only 10 big endowments. And then there's one other trick. There's one other twist, which is a lot of the assets of university endowment are restricted. Yeah, they're earmarked. Exactly, right? They're earmarked by the donors for specific programs. Yep. And so they're not, it's not, the endowment is not a giant pot of money that

the administrator can do whatever he wants with. Most of that money is actually off limits. If you talk to people who run these places, I'm not saying anything I don't think that they would agree with. Like, these places are actually quite, they're not levered in terms of debt, but they're levered in terms of a very high dependency on the entire structure that they have in place right now. And if there is ever a crack in, and the number of students, if there's a crack in access to federal loan funding, if there's a crack in research funding, if there's a crack in sports funding, if there's a crack in the tax structure, like these places are not as fiscally stable as they seem from the outside. And they seem, quite frankly, just from the outside, they seem unable to constrain any of this. They seem like they're on a one-way treadmill on everything that we're describing.

And then now on top of that, at least some institutions, you have these donor strikes, right? And so you have this kind of open question as to whether the donor flows are going to happen. And then let me add one more thing, which is where I start to get worried for my friends who run these places. So Gallup does this.

They do these surveys every year on trust and institutions among the American voting public. In 2015, 57% of American voters had a positive view of American. universities, 57%. In 2023, that's 36%. Well, statistically significant drop. Yes. So that is a, that is a, yes, for the math majors in the audience, that is a 21% drop in eight years. And so if you're running a business, like you're, at that point, you're like,

you're freaking out, right? You're, like, you're tearing your hair out and ending up with a haircut bent and I have because, like, you, that's just like, oh my God, what's happened. I'll just give you a couple other data points on that. There are, there are, you can see it, this on the Gallup website. There are drops in every subgroup. So there's no subgroup that has a higher view of universities. Everyone is a drop. And then among people with no college degree, it's a 25 point drop. And of course, if you're running a college, you're not used to thinking about people with no college degree because they're not your constituent. But the problem is they are voters, and they are taxpayers. And they are a large percentage of the population. And you do need their,

you do need their support in order to keep the sort of funding aspect of this rolling. And so And then there's this question of like, okay, 57 to 36 percent, 21 point drop in eight years. Is that anomalous or is that going to continue? And like, you could hypothesize that that was a one-off, but you could also say, wow, like. And that's before the current media blitz. Oh, this is all pre-October, October 7th. This is all pre the recent stuff. Yes.

The congrats from hearing. So if you poll today, yeah, if you poll today, it would be hard to imagine the numbers are higher. It'd be easy to imagine that they're lower. But let's even say, so what's the baseline? is the baseline a 3% drop per year? If you just go in the last eight years, eight years, 21%, it's like a whatever,

two, two to three, two, two, two to a half, two and three quarter something percent drop per year. And so if you project that forward in the next decade, but you could lose another 25 points. So that 36, that 36 could drop to 11. Yeah. By the way, 11, 11 is like where Congress is, right? Like, right?

And so like there are institutions in the U.S. that have like 11, 10, 9, 8 percent. People don't pay for them. Or like, don't pay for them. directly. Congress has a huge advantage they get to set their own laws. The rest of us are subject to that. And so I think there's a really fundamental, I think if I were a leader of one of these organizations or on the board or just as a public-spirited citizen as I am, like, and I want these institutions to succeed, I think there's a really fundamental, critical thing that you have

to look forward, you have to look out the next five to ten years and say, okay, if these current trends continue and if popular support drops with 36% to 30 to 20 to 10%, which is a real possibility, Like, is there, therefore, the political will in the country and support to maintain the current structure? And in particular, the current funding structure. And I think you need to close your eyes and imagine that you lose the operating tax break. You lose the endowment tax break. You lose the potentially the research funding. You lose the student loan.

Like all these things could come to a political head, I think essentially at any moment with the pressures that are in place right now. And basically like... The candidate could win based on a promise to defund the university if you're not careful, right? Yeah, exactly. And of course, again, we've tried to not talk that much about partisan politics on this, on this, in this thing. But to the extent that these places have become very partisan political actors themselves, they're having an a, maybe their supporters feel better about them, but they're having an alienating effect on a large part of the, of the voter base and a large part of the political structure of the country. So I think there's a, I think there's an existential question. And it's not, look, it's not that these places don't have lots of levers that they can pull and lots of things that they can rejigger. But to your point, like kind of what's the level of, What's the level of sort of predictive power and then sort of leadership willpower that you need to get in front of problems like this? And I think that's a very open question right now. Yeah, yeah. No, it did scary.

I mean, you have to, like I would just go back to the, like, gigantic amount of goodness that's in the universities. And all these problems could certainly undermine that in a kind of fundamental existential way. If these trends go unchecked, very, very bad things could happen. So, which gets into, okay, what do you do? Yeah. So we're pushing, we're coming up in two hours. And so I think we should probably not have the long form, what do you do, a conversation this time.

I would just volunteer, add whatever you like, but I would volunteer two things, which is one is, well, there are actually three questions, which is one, one is the reform question, which is like, okay, what, if you were, if you were still on the board of Columbia, what would you be trying to do? And like, what's the reform opportunity?

And look, which of these problems do you actually want to tackle and whatever, so forth, all the, all the interesting questions that flow from that. The second question should be, would be like, look, like, and should there be more universities? Like, one of the issues is just like they're just aren't, as you said, there just aren't enough slots. Maybe part of the answer is create new institutions, and maybe you figure out a way to get them accredited and so forth, but or figure out another funding model. Or maybe they happen in other countries or whatever.

And so could you start new competitive institutions that maybe are able to solve some of these problems if it's too hard to reform the current ones? And then the third, and this is probably we should set up another session on this. But, you know, then there's also like, is there a potential, is there basically, for an entrepreneurial opportunity here that would basically be a side effect of unbundling. And so, for example, could you take the credentialing component of it and have a business or entity of some kind that just did that? Could you take the educational course thing, break that out separately? Could you take the research part, break that out separately? The policy part, the immigration part, the sports part, the social aspect of it. And there are, by the way,

and there are founders and startups in a bunch of these sectors. Yeah, yeah. We funded overtime, which is doing that in the social. sports area. Yeah, exactly. And so like does it make sense to think about either startup, more startup companies in these sort of unbundled categories? And by the way, maybe it's not all for profit companies. Maybe also we just need like literally more nonprofits. Maybe you need actually sort of independent entities. Maybe they may be hypothetically there should be more independent research institutes or independent science institutes. You mentioned HHMI. Like maybe maybe funding should go to, maybe there's a different way to do research funding. There should be a much bigger philanthropic

component to research funding in place of the government's role. And there are people, Patrick Halson has a biggest, and his wife have a big new biotech Research Institute at Stanford along those lines, or associated with Stanford, but a separate thing that they're funding. And so there's these very kind of interesting questions along the way.

So anyway, for the entrepreneurs of the audience as you're listening to this, is just think, okay, think about each of these sort of functional components of the modern university, like historically when there's sort of this sort of systemic situation going on, there's often entrepreneurial opportunities to kind of split off aspects of it

and break them out into separate categories. Yep. I think those are all good. I mean, just kind of going back to your question for me, which is, okay, if I was a trustee still at Columbia, what would I advise them to do? And I think that, like, I kind of think that a huge or a very large part of the problem is the number of constituencies that the university has. So you have, as we kind of alluded to, you've got the student, you've got the parent, you've got the donor, you've got the, you have the trustees, you've got the sports fans, you've got the faculty, and you're kind of trying to optimize this very elaborate bundle for all those constituents. And I think that that's got to be focused. And I think the way out is to focus on the student, because the student is the thing that, if you, basically the way I would look at it if it was my business. And a university is different than a business, but it's got a lot of the same characteristics. I think if you lose this student, you're done. That's the end of the whole thing.

Like, it doesn't matter what the faculty think. It doesn't matter what the alumni think. It doesn't matter what the donors think. It doesn't matter what anybody thinks if you're not attracting and developing the brightest minds in the world. Like, if that's no longer happening, then that's it. Like, game over. And so my view would be, I would try to refocus the whole. university on the value proposition to the student and then the kind of student that we produce.

Like how do we attract the best, give them a value proposition so when they come out, they make an outstanding living, easily pay back their student loan, and everybody wants to hire them. And like, let's go back to that. And I think if you had that as the focus, then a lot of the problems would, solve themselves. Now, very difficult to do because the university is a hierarchy and it's not a hierarchy. It's kind of like there's an administration, there's faculty, faculty have tenure. When you have tenure, you're very hard to remove. And there's just a huge constituents of administrators

and politics and everybody is hired. Like there is nobody owns, there's no owner, there's no founder. Like these things were founded a long time ago. There's no founder left. There's nobody who can just exert their moral authority to get that done. So I think that. It is a hard problem, but it is solved because the assets are so strong. I mean, they've got the gorgeous campuses, the amazing faculty, the incredible reputations, global reputations.

So there's a lot to work with, but these are real problems. I think that's a good point to end on. All right. Great. Well, thank you. Hope you enjoyed it. And then we'll be back to talk about how to solve it. Sounds good.

Thanks, everybody.