The Prof G Pod with Scott Galloway - Fixing the US Higher Education System — with Stig Leschly

Episode Date: January 20, 2022

Stig Leschly, the CEO and Founder of College101, an issue advocacy organization focused on US higher education, joins Scott to discuss a variety of issues surrounding higher ed, including the cartel-like price-fixing we see, the low admission rates, and the lack of innovation. Follow Stig on Twitter, @sleschly.  Scott opens with his thoughts on how he sees the metaverse playing out, specifically with Microsoft’s announced acquisition of Activision Blizzard.  Algebra of Happiness: own your narrative. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Episode 131. In 1931, Al Capone was sentenced to 11 years for tax evasion. If I was a mobster, I'd be a progressive mobster. I would absolutely kill women and children as well. Shout out to my little friend. Go, go, go! Welcome to the 131st episode of the Prob G-Pod. In today's episode, we speak with Stig Leschle, the CEO and founder of College 101, an issue advocacy organization focused on U.S. higher ed. Topic near and dear to our heart, I found Stig on Twitter tweeting out a bunch of interesting stats,

and he doesn't kind of buy into the conventional narrative. And I don't know, just sort of like brothers from another mother if my brother was smarter than me. Stig also teaches entrepreneurship at the Harvard Business School. I love people who rail from the inside. By the way, what's a key component or a catalyst for an effective change or effective change? Class traitors. What do I mean by that? Generals who warn of an industrial military complex, product managers who blow the whistle on their mendacious management, and academics who call foul on their institutions from the inside.

Does that make us hypocrites? Maybe, maybe, but I think that I'd like to think pursuing the truth regardless of who it offends, including our colleagues, is a key to progress. Okay, okay. What's happening? Let's start off with some news around the metaverse getting serious about creating a cryptocurrency and selling virtual goods and NFTs. Further reporting by Bloomberg says that Walmart also filed for applications called Verse to Store, Verse to Curb, and Verse to Home for shopping services. It's all about the name. Verse to Curb, Verse to Home. You can see V to H, V to C, V to S.

That's smart. That's good. Anyways, in addition, Walmart is also trying to brand itself in virtual healthcare and education services. So what's going on here? How practical is the metaverse for Walmart? They put out something strange a few weeks ago talking about shopping that felt like something from 1995. I'm not sure the metaverse and Walmart make a ton of sense. If you break down the metaverse into three buckets, and that is cryptocurrencies, NFTs, and DAOs, which is probably, and I guess

the underlying technology is a blockchain. If it sounds like I really don't know what I'm talking about, trust your instincts, and neither does anybody else. And that's part of the reason this thing has taken off in value is there's some very fundamentalist viewpoints on this stuff that make you feel like an idiot and their kind of go-to whenever you disagree with Solano not being worth the value of the airline industry that you just don't get it. And they're right. We just don't get it. I'm still trying to find a business that's not speculative that is built on the blockchain. Anyways, we'll see. So what do we have? a business that's not speculative, that is built on the blockchain. Anyways, we'll see.

So what do we have? We have crypto, we have NFTs, we have DAOs. I'm quite skeptical outside of Ethereum and Bitcoin. Bitcoin appears to have established credibility as a store of value. It's more easily transferable. It's more easily divisible. It has some advantages over gold. Try and get $100 million worth of gold to London in a suitcase. Not easy.

Not that I've tried. Not that I've tried. And then you have Ethereum. It seems like every smart contract or application involving NFTs, reverse engineers to Ethereum. Oh, by the way, I should disclose I'm an investor in Ledger, a cold hardware storage wallet. I think as more and more assets go here, there's more and more hacks that people are going to want a non-hot wallet to ensure that their crypto is safe. And I wanted to learn in a smart company out of Paris, wanted an excuse to spend more time in Paris. Anyways, there you go. I'm on really interesting.

The idea that you could expand the universe of potential investors with a predetermined mission. Let's go buy a copy of the Constitution. Let's go buy, I don't know, 2% of Twitter and then demand they move to a subscription model. There's an idea. There's an idea. Right now, the fees, though, are crazy. So I am somewhat bearish on crypto outside of the kind of two major coins. I like NFTs. Why? Because of signaling. Specifically, the way we signal is with scarcity value. You're about to see the mother of all IP

or a boom in intellectual property attorneys as they represent Hermes in Hermes' attempt. And it's a smart effort for them and every other luxury bag to ensure that nobody can have a Birkin bag offline or online that doesn't pay a licensing fee to the French luxury concern. Because I think if you're going to be spending a lot of time in the metaverse, you're going to want to signal. And if more people are meeting online, as they are now, one or two relationships now begin online, any metaverse is about signaling your power, whether it's being on the leaderboard, whether it's by having the right weapons that you purchased or that your parents purchased, or ultimately signaling scarcity value by having a Ferrari.

And I would imagine Ferrari is trying to make sure that the only way you can park your virtual Ferrari in front of your virtual house in your beachfront property in the metaverse is to, in fact, have an NFT that they get a licensing fee from. So, I think the signaling is going to move online. from sports teams, Real Madrid, the Glasgow Rangers, the Dallas Cowboys, to media assets ranging from Miramax or Lionsgate to Netflix are going to increase in value as the marketplace senses they might have an incremental new revenue stream from NFTs. And speaking of the metaverse and IP protection, let's talk a little bit about patents. The Financial Times reported that Facebook filed for patents that reveal how Zuckerberg wants to monetize his version of a virtual world. According to the FT, rather than relying on revenues from Meta's VR headset, the Zuck wants to monetize the Metaverse via advertising and by creating a virtual store to support the sales of digital goods and services.

One of the patents is a way to present users with personalized advertising based on age, gender, and the things they like to comment on. Another patent will allow third parties to sponsor the appearance of an object in a virtual store. Again, going back to this notion of what will you be able to present in this new world. I find all of this so strange and so compelling, and I can see how it might be big, and I could also see how it might be just a giant fucking bubble. Who knows? Who knows? All of this is to say that things are certainly heating up between the big players looking to grab users' attention in the metaverse. Most recently, Microsoft's acquisition or announced acquisition of Activision Blizzard for $70 billion, the gaming industry's largest deal ever. This won't get the attention it deserves. Everyone was obsessing over Bezos acquiring MGM for what was it, $5 or $6 billion, basically. James Bond, Jeff Bezos, both very big,

ramped up superheroes. And that makes for a great headline, but the gaming industry is a blue whale compared to what is the, I don't know, guppy that is films. Think about what's going on here. With Activision, you have Call of Duty, Warcraft, a ton of other incredible titles, and you have an install base of the Xbox. When we talk about the metaverse, what do we mean? We mean a different reality that mimics our reality that isn't limited by geographic boundaries. So I find the closest thing to a metaverse is, one, the Appleverse, which is the App Store, where effectively you have all these different internet services tied together in one place with an economic model, specifically a toll of 20% to 30% that leverages other people's human capital and creativity. So the best business model for the metaverse is, in fact, the App Store, where 750 new metaverses are launched every day, and there's about three-quarters of a million metaverses all around this giant galaxy called the App Store.

But the true metaverses, as kind of initially or currently envisioned, are video games. And what do you have? You have sub-economies where you buy things, you have relationships, you have certain norms, certain standards, a certain code or certain ethics. And these are, if anyone, anyone who has an 11-year-old as I do

realizes that when your kids go into this metaverse to pull them out of the metaverse, they get this serious jet lag and that they turn into assholes and are literally, you know, don't want to take their lips off the crack pipe that is being in this metaverse where their brain gets rewired. If that sounds unhealthy and like bad parenting, again, trust your instincts. And anyone who wants to give me a purity lesson or scold me about not having your kids on screen, that means one thing. That means you don't have kids. Anyway, anyway,

what do we have here? We have a $70 billion acquisition, not some Joey Bagadone, it's $5 billion acquisition of MGM UA because let's talk about video games relative to movies, which get way too much attention, the movie industry and video games get way too little attention. Effectively, if you have a hit movie, it does 5 million a day, 5 million a day for 30 days. That's a monster hit, $150 million in its opening month, which means it's going to go on to probably make several hundred million dollars. That's an Avenger-like movie that is just a huge amount of risk and considered the biggest hit of the year. Well, what if you had a movie that every day did $5 million? And guess what?

Something strange happened on the way to the video game enterprise, and that is it just kept doing $5 million. And guess what? Something strange happened on the way to the video game enterprise. And that is it just kept doing $5 million a day. It just kept doing $5 million a day. Well, you don't need to imagine it. That's Call of Duty. That's Fortnite. As a matter of fact, I think Fortnite does more.

They are effectively the biggest, they're the number one box office movie every day. And it's the gift that keeps on going. What if Avengers Endgame was still doing the same amount of money every day today that it did when it opened, whatever it did, 12 or 24 months ago? What if Star Wars, The Empire Strikes Back, which I thought was an underrated sequel, I thought it was pretty good. What if it was doing the same amount of money today that it did in its first week opening? That's what you have with these franchises. In addition, the metaverse, if you think about the metaverse being a series of internet services,

video games, relationships, economics, interoperability, the core here, the ground zero is games. So we predicted last week on my other podcast on Pivot that you would have, that the video game space would heat up. What are the only two media channels that are growing? Is it television? No, that's in decline. Is it print? No, that's in decline. Is it radio? No, that's in decline. Podcasts? Oh, that's going up, but it's a tiny business. It's only a billion bucks. The two businesses over 10 billion, the only two media channels over 10 billion that are growing are one, streaming, and two, you guessed it, video games. I think this is a very exciting field.

And I would argue that in terms of young people, in terms of your own human capital, if you're interested in video games, I think understanding this business, whether it's as an equity analyst, understanding how to be in the finance department of a video game company, understanding creativity, understanding programming of video games, understanding how to market them. I think that is just a fantastic industry that is going to be the gift that keeps on giving. So what happens overnight? The Xbox gets more incredible content, gets another revenue stream, gets immediately overnight, Microsoft is sort of arguably the leader or one of the leaders in the metaverse

as the Zuck is over kind of playing with his failed object that no one wants to tell him is the ugliest newborn baby in the world is Oculus. And Sayu Nadella is doubling down on his existing built-in infrastructure and mobile, which Activision has a lot of fantastic games that started in mobile. You have, or Blizzard, I should say,

and they have a lot of sports games. I mean, I think this is big. The wildcard here, and the reason why I don't think the stock is trading or it's trading at a discount to its proposed acquisition price, is that the FTC or the DOJ may sharpen their pencils. And in a justifiably concerned way, The FTC specifically, Lina Khan, who runs the FTC, and Tim Wu are very weary of these large acquisitions and a consolidation in our digital lives, and they should be. So whether or not this gets through is going to be very interesting. So what else is going on here? What this indicates across the larger ecosystem is just massive M&A based on companies that have tripped. Now, what do I mean by that? Effectively, Activision was trading at about a 30%

discount to where it was trading last year. And that is because some of the controversy around sexual harassment slash discrimination within the company, missed earnings. The stock was at about 100 bucks and then crashed about 30 or 40% missed earnings. And then Microsoft, who likely had conversations or approached them before, swooped in and said, hey, we have an idea to give you kind of a clean start

and turn the page, if you will, which was probably very attractive to Bobby Kotick, the CEO. The same thing's going to happen. The same thing's going to happen at Pinterest. The same thing is going to happen at Peloton. I think the same thing's going to happen. The same thing's going to happen at Pinterest. The same thing is going to happen at Peloton. I think the same thing's going to happen at Twitter. I think Twitter, Pinterest, and Peloton,

all acquired in the next 12 months as their valuation has come way down, which makes them much cheaper. In addition, whether it's supply chain issues at Peloton, whether it's business model issues or valuation or just can't seem to live up to the promise or command the space that occupies problems at Twitter, whether it's a valuation declining because it sits on top of a shitty business model at Pinterest. All of these companies are about to go Activision in the sense that their CEOs are going to start returning the calls of inbound suitors who are all looking for scale to either serve as a cornerstone for the metaverse. What happens?

What happens when a payment platform buys Twitter? Oh my gosh, it's 10 cent light in America. That's exciting. What happens when a company comes in and buys Peloton, maybe a Nike, maybe a Apple at 70% to 80% off where it was trading a year ago? Boom, it's the leader in connected fitness kind of overnight and going vertical. And what happens when Salesforce comes in and buys Twitter for what is effectively 40 to 60% less dilution than would have been incurred had they acquired them four years ago, because Salesforce's market capitalization has tripled, all of a sudden overnight,

they have this incredible communication, whether it's for corporate CRM or whether it's for really powerful first-party data, and they can move away from the shitty business model that is Twitter and move to more of the paid model, the CRM model of Salesforce. So what are we going to see here? A lot of companies similar to Activision are going to try and turn the page and start returning calls. We're going to see M&A activity only get crazier and crazier over the next several quarters. Hold on, folks. The ride's just getting started. Elevator up, then elevator down. Don't know what I meant by that. We'll be right back for our conversations with Steve Lesley to discuss the problems playing out within America's higher education system. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin.

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Go to ConstantContact.ca for your free trial. ConstantContact.ca Welcome back. Here's our conversation with Stieg Leschle, the CEO and founder of College 101, an issue advocacy organization focused on U.S. higher ed. Stieg, where does this podcast find you? Like most Americans, Scott, I'm in my attic, riding it out.

There you go. Outside of Boston. In Boston, great. in my attic, riding it out. There you go. Outside of Boston. In Boston, great. So let's bust right into it. Your firm, College 101, publishes a lot of data on the problems in higher education, including low graduation rates, fairly uninspiring job outcomes,

and obviously the ridiculously high cost. So what problems right now in higher education are most alarming to you? There are symptoms, Scott, which you allude to now. And to summarize them really briefly, you know, if college was a patient, Scott, and you were a doctor and walked in, alarm bells would be going off. This thing's got a fever. It's big, right? So these are the prices going through the roof for 50 years. The fact that half the college kids out there right now won't ever finish. And those grad rates are staggeringly low in some corners of higher ed, particularly

the two-year college system. And for the few who get through or the half who get through on average, then an uncertain future awaits on the other side. This has been going on and getting worse for 50 years, Scott. And also these colleges, these 5,000 colleges, they're pretty much fixed in their designs. So there are all these overt problems, Scott. There are all these sort of red flags all over this sector. I have a very strong point of view about how we got here, which is what I think you have referred to in shorthand as the cartel. And to me, it's a kind of purposeful, predictable public policy debacle, where what's actually happened for 50 years is the government has set out to pay for college. That's an underdescribed phenomenon, Scott. But if you

look at the cash going into colleges in America, more than half, and sometimes a large majority of the actual dollars that end up in colleges are coming from state or federal governments. $300 billion of cash heading into this sector. So the government's basically paying for college. And state legislatures pay the public colleges a lot of money directly. And then the feds issue Pell Grants and loans. So it's one of the most, I think it probably is the most subsidized sector in American society, number one. Number two, we've got 5,000 colleges today, Scott. And give or take a few sort of small chapters, we had 5,000 colleges 50 years ago.

And lastly, nobody is holding them accountable. No one ever walks up to a college and tightens their sneakers about their outcomes. So what you have is a government paying for a fixed set of providers who are basically completely protected from accountability and, to me, most alarmingly from new entry. And so is it any wonder, Scott, that prices have been going up and quality has been going down for 50 years? Isn't a lot of it also that the fetishization of corporations? I mean, students show up and demand a lot at NYU for their $7,000 a class or $62,000 a year.

And we immediately bust into, well, you're not the customer, you're the product. Our customer is the corporation. And the reason you come here is to get a great job at Google or McKinsey. Until corporations stop fetishizing these organizations who then employ this luxury strategy, which we'll come back to. But don't, first off, we have to go right at the demand side and try and convince these bigger employers to find other on-ramps into the organization? Yes. And I'd sort of double or triple down on that, Scott. I think all the outside observers of higher ed have to sort of get over the mythology that the talent is in a small number of branded selective colleges. That is mathematically impossible. So all the talented young people, 18 to 20, all of the talented mid-career types

are overwhelmingly going to be in typical four-year public, four-year private, in many cases, two-year community colleges. And that has to be told, that has to be understood because there just aren't enough dormitories, Scott, as you've talked a lot about in these much-talked-about fancy colleges to house but a tiny fraction of the town. So yes, employers have to begin to look for the talent in all the right places. And the other thing though, to be fair, Scott, is the universities. And I'm talking about the mainline four-year publics, four-year privates, two-year colleges have to get a lot better at training these kids. So the only humans who aren't at fault

are the students, I would say. The institutions need to get better on the wholesale. And then the media, the employers, our society at large have to sort of relax into the obvious mathematical fact that most of the town in America is sitting around in non-selective colleges. They're working hard, trying to get ahead. Yeah, and two thirds of our kids end up at public schools. We talk about the Ivies.

I've written off the Ivies because I think they've doubled down on exclusivity and kind of a rejectionist culture, but also you don't move the needle there. Ohio State will graduate more kids than the entire Ivy League. So if we want to talk about moving the needle, we got to talk about our public universities. How do we, I mean, how do we, so if we convince corporations to reserve 10, 20, 50% of their jobs for kind of quote unquote non-elite college grads, what would do the magic wand? What would be the three or four things you'd want to see happen to fundamentally reshape? Other than entrepreneurs coming in, I'm less, I think entrepreneurs will

provide a great, I have an online ed startup second floor, I'd like to think that we'll put pressure on universities. But there's also some externalities to bringing a profit motive into this. And I still think you've got to figure out a way to create incentives around our public universities, the Badgers, the Gophers, UNC, the UTs of the world, and also the great junior college system, Cal State. Tell me about the three or four things you think would be the pillars of reform that could kind of stop what I would describe as this assault on the middle class. Yep. So look, if you take higher ed, formalized, conventional, statical higher ed exists right now, those 5,000 colleges out there. The first thing we have to recognize, and it's bad news,

is that most of them cannot change, Scott. So if they're not even close to being priced correctly, if they're not even close to having the right kinds of outcomes, if what they need to do is fundamentally reallocate their resources and redesign themselves, then we have a really straight ahead, blunt feasibility problem. Because two thirds of them, to your point, are public agencies. All of them are mired in fixed costs, buildings and staff. Most of them, contrary to popular perception and the sort of Ivy's plus aside, are structurally bankrupt. They have no cash. Scott, they live payroll to payroll and their governance is

completely busted, right? You and I have both been in meetings with college administrators. So the idea that we can, via public policy or via cajoling, cause thousands of colleges to reinvent themselves, I find implausible, sadly. Number one, bad news. Good news is this, because there has been not a single smattering of new entry and therefore real design innovation in this stuff, like the real application of technologies, the real use of all the advances and what we now know about tutoring and student the real application of technologies, the real use of all the advances and what we now know about tutoring and student coaching and all of that. If you get five, then 50, then 200, then a thousand, here it goes, Scott, tightly monitored nonprofit college

startups. Because the profit motive gets really, really crazy bill in a sector as subsidized as is higher ed. But if you let the entrepreneurs in, I do think, Scott, that you can get enormous demand shifts. And here's the evidence proof of this, which is if you look at Western Governors University run by Scott Pulsifer or Southern New Hampshire University

run by Paul LeBlanc, these are on the lead. They're trying really hard, Scott, to create scholars designs that take advantage of technologies that actually meet students where they are, right? So a student can have a job and a family at the same time.

And by the hundreds of thousands, students are migrating. So let's say you and I set off and start a new college, like even a community college, and we could actually draw it on a whiteboard. We could compete. So I do hold out hope that if we introduce the entrepreneurs in, we can get disruption

and we can get demand shifts. That's a thought. That's my one thought, Scott. I have half a thought that I still think one of the top 25 endowed branded colleges will wake up and decide that they're going to ship scalable online degree platforms with the full benefit of their brands in STEM fields or business degrees. And that you could also get disruption and new designs coming from a very small number of wealthy colleges that could underwrite innovation. That I think is the only way to change higher ed fundamentally because, you know, and all

of what sort of passes for higher ed reform in DC right now, Scott, like let's give these things more money, bad idea, unless you get innovators in to use it better. Right. Or kind of well intentioned, but really limited stories about accountability, which are limited, Scott, because no governor is going to close a college, right? Nobody's going to really, it's just bad politics. So I think the only hope inside of higher ed is to introduce innovation. Now here's the last idea, Scott. Now, if 10 years from now, you have me back on this podcast and this hasn't worked, then I say free the subsidy. Then I say, walk up to 20 million American college kids and say, hey, look,

we're giving you a hundred billion dollars a year in federally subsidized loans and about a hundred billion a year in Pell Grants and tuition aid. And option A, you walk over to those 5,000 colleges where you have a coin flip chance of graduating. You can continue to do that. But here's plan B. Over there is Coursera. Over there is Google Certificates. And here are elite corporations and apprenticeships. So basically liberalize the subsidy. Now, there arises there, Scott, a really tricky regulatory problem because you're pointing all the federal subsidies and the public money at private actors. And the profit motive, as much as I love it, is going to go nuts. But at some point, I'd rather have that problem than trying to fix the incumbents. But the way to fix the incumbents is not to talk to them directly, to re-regulate them, to refund them,

though we should keep doing that as best as we can. It has to be to get the innovators in and get a tightly monitored pathway into higher ed for startup colleges. And I'm not going to talk about accreditation, Scott, because every single listener to your podcast would turn it off. But there's this obscure hiding in plain sight institution, American society. It's the trade associations of colleges. They're called accreditors. They control who gets the status to qualify for public funding. And so we need this obscure reform in accreditation so that we can get social entrepreneurs into the college space. your notion of some sort of voucher and the anti-charter schools will, critics will go crazy when they hear that. But the idea of saying to someone, look, here's a certain amount of government support, go get certification in a vocational field.

50% of Germans under the age of 40 have some sort of certification of vocational. Ours is less than, I think, 10, maybe even less than five. Recognizing that not everyone is cut out for college. It's evidenced by the fact that two thirds of our young people don't end up with a traditional BA. The thing I think I would overemphasize or underemphasize, or where, and I'm open to evolving around this, is I think we tend to fetishize and romanticize the entrepreneurship and innovation part of this. And I wonder if the way, the best route between here and going back to when you and I went to school, where it was lower cost and easier to get in, is to take our great public universities and scale them. To say,

you know, a little bit what they're doing at Purdue, ASU, but I met with the chancellors of Berkeley and UCLA and we were brainstorming, well, what if we built a new campus, very connected, very remote, and said, all right, we're going to triple the capacity here and we're going to do two-year micro degrees and things like cybersecurity or health tech. because there's just, the demand feels almost limitless right now for certain professions. And just say, all right, we acknowledge that you may not afford or may not want a traditional four-year degree. But my fear around the new guys or my bias towards existing players is that young people are, to use a term, they're stupid. And that is they love brands. Brands love young people because they self-identify through brands. They don't have a lot of life experience, so they defer to this thing called a brand. And these brands are just so powerful. And I wonder if we would get more bang for the buck if we figured out a way to incorporate big and small tech to try and take, you know, the University of Wisconsin-Madison from 30,000 kids to 200,000 with a mix of big and small tech.

I don't think you can cut costs, but I think you could make them more productive or efficient if we might just get more productivity and more scale and demanded that they innovate. Porsche has an SUV. Tide has Tide Pods. Our product is the same packaging, the exact same. I mean, it's hard to imagine an industry that has innovated less in the last 30 years other than massively increasing its prices. So what about massively doubling down

on our public universities? And also what about, and this is more controversial, removing the tax exempt status of elite universities that don't grow their freshman seats faster than population growth as they're no longer really public servants or kind of luxury brands educating the children of their donors. So a lot there, but I'd love to get your- don't grow their freshman seats faster than population growth as they're no longer really public servants. They're kind of luxury brands educating the children of their donors.

So a lot there, but I'd love to get your thoughts. I'm basically going to agree with you in a variety of different ways here, Scott. So first, I hold out a slight bit of hope. I don't want to spend a lot of time talking about the top 25 selective branded colleges in America that educate 1% of kids, right? So remember, 25 schools in America admit less than 10% of the applicants to educate 1% of kids. There are 200 schools, Scott, that admit less than 40% of the applicants, 200, and they educate less than 10% of kids. So there are these tiny, tiny, but constantly talked about institutions on the side, and they are the brands. They're the ones that are widely recognized. And look, I spend some time telling my friends who work in these places that

actually the best thing you can do for that brand is to study the Navy SEALs, which is, that's the brand, right, Scott, which is everybody knows, like Scott, you and I can go try out for the Navy SEALs. We got to swim a mile underwater to survive. We're going to get gonged out. Like why wouldn't Stanford and Vanderbilt and Amherst and Harvard say that to America, which is look, anyone can come try out.

We're the Navy SEALs, but it's going to be hard. And this is where I'm a big fan quietly and from a distance at MIT, Scott, because you can't get it. You get into MIT on your own by and large. And when you get there, it's hard. There's another problem with these elite colleges. It's actually very, it's not rigorous anymore, but so I can, and by the way, here's one little refinement on this, Scott, which is, so go to UCLA, for example, if you were head

of UCLA or Yale or something, or go to UCLA, what I would do is go over to Anderson, the business schools, kind of say, look, we know we can teach online in super scalable ways, certain kinds of degrees that where the knowledge is explicit. So think accounting and think computer science. So why wouldn't Anderson, even as it trains the elite CEOs of the world, Anderson Business School at UCLA, also trained 50,000 humans with an associate degree in accounting. I think that's brilliant for their brand and they can do that rigorously. So the, yes, they need to expand. Scott, yes, I think the flagship four-year public state schools and land-grant technical schools like Caltech and Hopkins and MIT,

these are the ones in whom I have the most faith that they can innovate. And yes, they should build more seats in physical locations where they can. And also, they should look for ways to go fully branded online without hesitating, without talking down to their graduates online in degree fields, in business, math, economics, computer science, where it can be done rigorously online. Then those branded colleges, Scott, can reach a lot of people and become relevant. And they can do it, I think, in a way that protects rather than undermines their brand. So I think that's a moment of hope in the whole scene as consistent with what you're saying. And can the government put pressure on them to do that

by revoking their tax status or otherwise? I wouldn't mind, but I'm less hopeful about that because the politics of this, but I think the sheer economics of this become very appealing, very fast. And then beyond that, Scott, but here's the deal, man, like one third of American college goers are going to two-year community colleges. You're right. Another one third is going to four-year publics. Many of them are not flags of schools. So we have a big institutional crisis there, Scott, where we have to have a story about that, which is how to either fix those institutions or cause innovation in and around them, which gets me back to my story about getting entrepreneurs and innovators in as well. Yeah, it's something you said.

I love this idea that you have around the Navy SEALs. Anyone can show up and, you know, many are called, few are chosen. And to a certain extent, are we sort of doing that? And just as the Ivy League and the elite universities get too much airtime, the part of the supply chain that doesn't get enough airtime

in terms of the role it can play is our junior colleges. And that is anyone can show up to a junior college. And if you're good, at least my roommate at UCLA was a kid who went to, I think, College of the Canyons in Newhall and did well there for two years and then was able to transfer into a UC campus. I mean, most of us don't peak at 18, right? I don't know about you. I did not have my shit together at 18. I actually went to UCLA at 17 because it was an era where you were supposed to let your kids skip a grade, which was a bad idea for a lot of reasons. But I just wasn't ready for UCLA. And I think a lot of kids aren't ready

for college. So are there, do junior colleges, is that the place we should be focused on trying to figure out a, either a micro certification there just after two years, or if you like school and you excel entre into one of these bigger public schools with a, you know, with a great brand? Yeah, I think I'd split the question in half, Scott, and take a very different tone with the students versus the institutions. So first of all, on the students, Scott, and take a very different tone with the students versus the institutions. So first of all, on the students, Scott, we got to end all forms of the nonsense that there's some kind of strong discontinuity between a kid in a two-year college and a kid at Stanford.

I don't buy it. I can't live like that. I genuinely don't believe it. Maybe it's because I'm Danish and the way I was raised, everybody's worthwhile. But we can't pound this hard enough. I just actually recently met the folks, just an anecdote on this, Scott, you should meet this guy, Garrett Lord, who started Handshake, which is the unicorn. And Garrett and his roomies in a technical college in the upper peninsula of Michigan were beautifully educated and went back and created Handshake, which is sort of the LinkedIn for college kids to try to actually promote the massive reservoirs of talent that are

in typical four-year colleges, two-year colleges, so to get them connected to employers. But the point I'm making here, Scott, is like everywhere and always, the talent is widely distributed across these colleges. And yes, you're right. Kids mature at different stages. I've seen that as an educator all my life. So we should be incredibly generous and supportive of that. And there's nothing more obnoxious than when a graduate or employee at places like our employers actually confuse themselves into thinking that the two kids that go to super selective schools, while they are wonderful, I know them, I teach them, I admire them, but they're not fundamentally different than the legions behind them. So that has to be the point of view with the students.

Now on the institutions, I think we have to be very measured here, Scott, because on the one hand, we have to be very generous with two-year colleges and non-selective four-year universities to their immense credit and courage. They take all comers. And as a result, like they have a very, very hard job. Harvard does not have a hard job. When you admit that few students, you can pretty much turn the lights out and things are going to be okay. So we have to be very, very supportive of non-selective universities because of their student inputs. But where I'm pretty merciless, Scott, though, is in their kind of stubborn designs, in their inability to innovate, and in their stasis. I mean, don't forget, 28% of kids who line up at a community college today will graduate in three years. And if you look at populations that are vulnerable, including,

for example, Black kids, you know, those numbers start to approach single digits. And no, they needn't be 90% completion rate, Scott, because these are students who need a lot, but it should be higher. And so there is, there's dysfunction in these places. This goes back to 50 years of the government's paying for it. No one's holding you accountable and you can just raise prices and do what you keep on doing. So we have to have, I think, a pretty unapologetic request of mainline colleges that they get better. And that is a very tricky public policy problem. And one last thing I'll say here, guys, remember there's about a thousand non-selective four-year private colleges out there. They're potentially the most problematic ones. They're expensive. They don't have any better completion rates and nobody's ever heard of them. And if you can pay, you can go. And now, you know, you have that version of

the problem too, Scott. So there's a big institutional reform problem here sitting in plain sight. And if we can trigger the elites that have some extra money, they're endowed, they have brands, they have resources to innovate and to potentially go online so they can do more. That's a step, massive step in the right direction, but it will leave on address, Scott, a huge centerpiece of this problem, which are literally thousands of colleges where we need a plausible explanation for how they're going to cost a lot less, graduate a lot more kids and get them into jobs. Yeah. I mean, the pricing here, and we've gotten sort of comfortably used to it, it's just so corrupt. If you think about a Mercedes, a flagship, fully loaded S-Class, around $120,000. Let's say that approximately the tuition at a four-year university might be around $120,000.

And if Mercedes said, okay, we're only going to let 10% of the people who want to buy a Mercedes buy one. And then BMW said, we're going to do the same thing. And then Lexus said, and basically you end up because of this gestalt where you failed as a parent, unless your kid gets a college degree, you end up with a lot of households who take on $120,000 in debt to buy their kids a car that's a Hyundai. And the fact they're charging the same prices, it's just like something is so wrong. It's like if everyone talks about OPEC as a cartel, and I'm leading into this question about this new lawsuit, everyone talks about OPEC. OPEC has nothing on the cartel that is U.S. higher ed.

Gas prices, the OPEC cartel has failed on an inflation-adjusted basis. Gas is cheaper than it was 40 years ago. That is not true of education. You know, it just so happens NYU raises their prices 3% of the pandemic. And then what do you know? We look around and everyone's raising their prices between 2.9% and 3.1%. I mean, that just didn't happen by accident. So look, there's this like staggering market breakdown. Like how does it arise that a set of institutions can raise price 6% a year for 50 years? That's the advertised sticker price. The inflationary qualities of the actual price that kids pay, which is after they get financial aid in some places and the Pell Grant is still

incredibly high ahead of inflation. So how does anything go up ahead of inflation for 50 years? The answer, Scott, is because the government's paying for it. There can be no other explanation for this. So there's this profound irresponsibility by our state and federal legislators, which is they are herding kids into this machinery. They walk up to an 18-year-old and they say, welcome to adulthood.

We have anointed one institution, it's called the conventional college, that will serve you. And here's the Pell Grant, and here's the loan. And your local governor is sending $100 billion a year straight to the public universities. The subsidy is so large that it prevents anyone else from competing, Scott. It crowds all the private sector innovation out of this thing. So basically, the government, it's one of the only places in society where the subsidy is so hard. It's basically a dictate from the government that you shall go over to these colleges. And from thence you get the problem. And then it's compounded by the fact that no one can compete with them and no one holds them accountable. And so the prices

go up and up and up. My experience as an educator, Scott, is 18 year olds, their moms and their dads, they know they're heading off into like the deep end of the pool. But where else are they going to go? That's the deep diagnosis in all of this, Scott, and why it's so urgent. One thing I'll say is, here's the good news, Scott, which is students in higher ed do actually choose. Because remember, half the public subsidy in higher ed, this is not true in K-12, goes to the student. Half of it or something like that goes directly to the colleges from state governments. Leave that alone. That's deeply captured. But so much of the subsidy goes to 20 million kids. They have in their back pocket the loan and the Pell Grant. They just need new options from which to choose. And if we can create them, Scott, you can get massive demand shifts. Again, that's Western governors in Southern New Hampshire. You innovate a little bit, you try really hard, hundreds of thousands of students will migrate. So that's why I have some hope. If we get innovators in, we can create turnover, demand shifts, and innovation quite quickly. We'll be right back. Hey, it's Scott Galloway. And on our podcast, Pivot, we are bringing you a special series Thank you. Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So tune into AI Basics, How and When to Use AI, a special series from Pivot

sponsored by AWS, wherever you get your podcasts. Support for the show comes from Alex Partners. In business, disruption brings not only challenges, but opportunities. As artificial intelligence powers pivotal moments of change, Alex Partners is the consulting firm chief executives can rely on. Alex Partners is dedicated to making sure your company knows what really matters when it comes to AI. As part of their 2024 tech sector report, Alex Partners spoke with nearly 350 tech executives from across North America and Europe to dig deeper into how tech companies are responding to these changing headwinds. And in their 2024 Digital Disruption Report, Alex Partners found that 88% of executives report seeing potential for growth from digital disruption,

with 37% seeing significant or even extremely high positive impact on revenue growth. You can read both reports and learn how to convert digital disruption into revenue growth at www.alexpartners.com slash box. That's www.alexpartners.com slash V-O-X. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters. So I think it's really difficult to be the parents who cut off their addicts from the drug and put up with the withdrawals. It's, I mean, theoretically, you just say, OK, stop. Every bubble, every, you know, as you described, this massive increase in prices is a function of cheap credit.

And the credit is always available. But if you were to stop it, the withdrawals are really ugly. Okay, thousands of stories of kids who were ready to go to college and now can't afford it because we decided to get heavy handed for some reason right now. Is there a more elegant solution? For example, there was just a shameful article in the Wall Street Journal about my institution, NYU, that I think something along the lines of, we have the greatest amount of debt that can't be paid back.

And what if we were to put universities on the hook for some of that unpaid debt? Might they be less promiscuous with these programs where they convince the marketplace to spend $120,000 in tuition to get a certification that will give them a $38,000 a year job? What if we, in other words, what if we tried to align incentives, not only upside, but also downside? I want to be in favor of it, Scott. And I do think there are incremental things in public policy that are better, right? Like cause the accreditor, actually measure a few things and hold some causes accountable, cause governors who have enormous power in regulating the two-thirds of colleges that are public to scrutinize them and so on. But here, I think, is the raw political deal, Scott.

The only stakeholder, the only institution in American society that can put pressure on incoming colleges are students by choosing and by walking. You're just not going to win and keep office. I don't care if you're a governor or an elected member of a, you know, a state commission of higher ed or someone in D.C. by putting tons of pressure on these colleges. Because closing any school, that's a recipe for the end of your political career from a public official. We learned that in K-12. And also, since there are no actual alternatives, this is your

point, Scott. Like let's just say we turned off the Title IV SPIC and state aid. You have crisis and calamity because there's nothing standing behind these colleges. So they are the only institution we have right now. It's very difficult to put enormous amounts of pressure on them because for the lack of alternatives. So I think, yes, that's not to say we shouldn't have accountability policy, Scott. It's not to say that we shouldn't fund colleges differentially based on performance. I'm for all of that. But a complete program for reform has to enable student choice into new providers. So it's interesting, and it goes back to this.

I agree that you have to get the students. Nothing's going to change. As long as there's seven applicants for every one admittee, there's no real incentive to change and you can keep raising prices. But I don't think the students move until the corporations move. And I wonder just based on what you said, if you took some of that money and said to, I thought the most impactful thing that happened in higher ed happened outside of higher ed and that is companies ranging from Apple and Xerox to Google said, we're going to reserve a certain percentage of our entry-level jobs for non-college grads. We're going to pursue people. I talked to this private equity firm, Apollo, and they're very sincere and earnest about trying to create new

on-ramps into this incredible platform called Apollo that provides fantastic entree into a middle-class, if not an upper-income household, and said, we got to move away from these luxury brands or these hedge funds posing as educational institutions. I mean, U.S. Corporation is the greatest creator of shareholder stakeholder value in history. And to date, when I went to Morgan Stanley, my analyst class, 85 new people, 80 of them were from Ivy League schools and five of us were from public schools and we were kind of seen as adorable. You know, we got a job from UT Austin and that was their, that was kind of their affirmative action. Oh, you went to Michigan.

That's so cute. Oh, you're the guy from UCLA. Until we say to these organizations, all right, there's an incentive to take a quarter or a half. I just think that students don't go anywhere. I think the students are going to go where they see the greatest opportunity

for upward mobility. Well, another question here, and I talk a lot about this and it doesn't get a lot of sympathy, but when I look at different groups, in college, I think it makes sense that you want different cohorts represented at some level that's approximate to their population or proportionate society. And the group that I see really failing is men. And whereas it was 60, 40 men, women 50 years ago, and we did wonderful programs to try and level up, it's now reversed. Now it's 60, 40 women to men, and it becomes two to one women to men when you talk about graduation rates because more men drop out. Do you have any thoughts about the role that college is playing and what, what is becoming sort of this imbalance between, uh, uh, male and female graduates? Yeah, no, it's the honest answer, Scott. I see it. You know, I was a K-12 educator for many years. Girls do better in school

than boys. I'm not sure I can explain why. And they do better in college. And it may be an age of life thing. And I do worry about it unequivocally. But I don't know where it comes from, to be honest. I can't really explain it, nor do I know how to fix it. And just to generalize out from it, Scott, the whole thing about the pull from corporations out of colleges, I do actually think there is progress there marginally. It's slow. It's

maddeningly slow. But every time, Scott, you say Ohio State rocks, it helps a little bit. I was talking to one of the head recruiters of one of the most prestigious investment banks in New York recently, and their favorite college to recruit from is Rutgers. 100%. And they're like, we're interested to recruit from is Rutgers. 100%. And they're like, we're interested in the kid from Rutgers who worked hard and got a degree in accounting and economics and had a real job over the summer. It all makes sense.

And so I think- Their experience was like that. They said, all I want is an insatiable desire to be successful. You bet, you bet, right? And so this is also some of this kind of rot inside the selective institutions by like how kids are admitted.

It's gonna come back on them by the employers because they're nervy now. They don't know how Johnny got into Swarthmore anymore. And so I don't mean to pick on Swarthmore or whatever. And so they're interested in kids who have some grit and they're very open to qualified kids coming out of these places. And there's a subplot there that's really important,

which is if you major in science, technology, math, business, finance, accounting, if you take those majors, then almost in any college setting, you're doing yourself a favor. And so I do think corporations are doing the best they possibly can to sift and to filter, to get at the talent. And the more that can be encouraged to do that and the more we can sort of like sanitize and clean up the false public narrative that all the talent is in elite selective colleges, we're helping. So I'll put to you the question I get all the time. And it's fun to ask someone else's question.

We're heckling, we're highlighting the role elite colleges are playing in this corruption that is higher ed. Why do I teach at Harvard Business School. And for reasons we don't go into, I think some of the things that irk me about selective colleges and the admissions processes are vanishingly rare at Harvard. I don't perceive it to be there. So that's me as a teacher, Scott. And I teach entrepreneurship, which I think remains the most powerful institution in American society for human freedom and for progress. So I teach the first year course in entrepreneurship mainly at HBS. And the other thing, Scott, is what has so influenced me was the 15 years prior running middle schools or helping to run middle schools and high schools and elementary schools for kids who didn't have a lot and watching them go off into the college system, the typical mainline college system. And this is where I just have this plea with elite, endowed, well-resourced branded colleges, which is take a deep breath for a minute, you guys.

Like Harvard, Yale, Stanford, Vanderbilt should be proud to educate all comers of different types, as long as you can do it with rigor and high demand. It's the Navy SEALs idea. And I do hope to wake them up, or I hope to wake up one day to find that they've woken up to do that. Stieg Lashley is a senior lecturer at Harvard Business School where he teaches entrepreneurship. Apart from his work at HBS, Stieg is a practicing entrepreneur and is currently the CEO and founder of College 101, an issue advocacy organization focused on U.S. higher education. I really, I think your work is inspiring. I love how sober it is. It's kind of, you know, just the facts, ma'am. And it's been,

I feel like I should be sending you royalty checks because I'm constantly going on some media outlet and screaming at the top of my lungs and citing your data. So keep up the good work, my man. I just think you're doing, I think you and your colleagues are doing a great job and appreciate your time and efforts today, Stig. Thank you, Scott. HodgeRib Happiness, don't give into the narrative. You own your narrative. And there are so many bodies, amorphous bodies, whether it's the marketplace, whether it's Twitter, whether it's sort of a woke narrative or a conservative narrative or the narrative on MSNBC or the narrative on Fox,

you own your narrative. And if you put something out on Twitter you believe and you get a bunch of pushback or your friends are disappointed in you that you're supporting a certain candidate, the people we tend to respect or really look back on in history and think that I admire that person is the person who said, my narrative is my narrative. And you want to be informed. I think to be principled or to have integrity, if you will, isn't having a set of principles and never wavering from them. It's trying to pursue the truth and get to the right answer. So be open to evolving and change, but don't feel as if you have to give in to the narrative of another entity or faceless mob. I find that the narrative being promoted around everything from Bernie Sanders supporters to anti-vaxxers to crypto bulls to Tesla longs. There's a certain

fundamentalist narrative that turns into heresy where if you don't buy into their narrative, you're a threat or you're stupid or you're old. And who knows, some of that may be true, but again, it's your narrative. And if you say something that offends people, as long as you're not trying to be offensive, as long as your heart's in the right place and you genuinely believe in that viewpoint and you have evidence and argument to back it up, it's your narrative. It's your narrative. Our producers are Caroline Chagrin and Drew Burrows. Claire Miller is our assistant producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network.

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Make every moment count with Klaviyo. Learn more at klaviyo.com slash BFCM. Support for the show comes from Alex Partners. Did you know that almost 90% of executives see potential for growth from digital disruption? With 37% seeing significant or extremely high positive impact on revenue growth. In Alex Partners' 2024 Digital Disruption Report, you can learn the best path to turning that disruption into growth for your business. With a focus on clarity, direction, and effective implementation, Alex Partners provides essential support when decisive leadership is crucial. You can discover insights like these by reading Alex Partners' latest technology industry insights, available at www.alexpartners.com. That's www.aleixpartners.com slash V-O-X. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters.