September 13, 2016

The Trillion Dollar Disruption That Hasn't Happened.

Of all the revolutions that we are currently living, technology is the most promising one. It has killed industries, obliterated professions, and elevated the standard of living for those consumers who have participated in the bonanza.

Technology (or more specifically, the internet) has disrupted the taxi monopoly on urban transportation, broken the chokehold of the prescription eyeglasses industry, and more generally, commoditized information

But, if the internet has destroyed the margins of information dispersion companies...

Sad news for journalism majors :(
... and made many disappear...

more sad news for journalism majors :(

Why is it, then, that the internet, which fundamentally is a revolutionary way to distribute (and potentially instill) knowledge, has not contributed to the commoditization of the Educational function of the University (whose mission precisely is to distribute and instill knowledge)?

The answer, as certain South African entrepreneurial bored genius simply explains, is reputation:


Alas, social animals that we are, we crave validation. We guide our actions based on the effect those actions will have in the perception others have of us. We buy status symbols that imply success. You don't buy a "puny" Nissan GTR if you have more than $100K to blow spend on a car; you get an Aston Martin, a BMW, or a Mercedes-Benz with that money --even though these might arguably be less powerful cars. Once a convention has been established socially about the implication of a brand (be it an Ivy league diploma, or the emblem in the hood of your car), we don't mind shelling out inordinate amounts of money to buy that implication

We might actually debate the value of spending 100k's buying the implication that you're smart over doing the same thing in exchange of the implication that you're a "winner", but the fact remains. You don't really need a College Diploma to escalate the social ladder, just like you don't really need those Louboutins to improve your self-esteem. 

No one would equate the magnitude of student debt to malinvestment either, but it would seem right to question our fetishization of IQ. Especially considering that only 10-20% of life success is tied to IQ. But somehow, we all follow this flawed logic, which is why the industry of "unstupidization" thrives so well. We keep buying Baby Einstein CDs for our little ones because we all want our babies to grow up smart; we spend money on "brain training" apps to "improve our IQ", even though they've been proven a sham.

Playing to the perception of others to improve your chances of success in life is something that sounds bad, but it's a reality that's difficult to avoid. People believe that University is supposed to improve your chances in life. And statistically speaking, it does. Just not always.

A ticket for a show that statistically improves your chances in life, is (understandably) a very inelastic good. No wonder why there's a trillion dollar debt from people pursuing those tickets, along with a swarm of rent-seekers promising to get them to you. 

Upending the University Diploma's Reputational Standard --creating a mechanism that mimics the implication of the reputational value embedded in that stamped piece of paper-- would unlock more than a trillion dollars of value. Whoever does that will be the next Zuckerberg --if that is even doable by a single person. The question is: how will it look like? Will it follow the creation of an online platform that emphasizes P2P evaluation a la eBay where freelance teachers build up reputation through feedback and let the gig economy do its magic? Will it take the form of an app that screens prospective students as rigorously as Stanford and then dumps incredibly hard content on those smart enough to pass? Or will it take the model of a pencil-based test graded by an enthusiastic network of people who refuse to use technology at all and every year churn out tens of thousands of "graduates" with a superbly respected certification that costs only $1,400 a year?

We still don't know. One thing is certain. The University is broken. And if we are to remove the next trillion dollar cloud from the sky of future generations, we might as well spend some serious time looking for ways to "kill" this model.