SCHUMPETER STRIKES AGAIN

Why the Ivy League could end up like the big 3 carmakers: utterly disrupted

America’s top universities today are like America’s Big 3 car manufacturers of the 60s: hugely profitable, projecting growth for decades, the envy of the world, dominating their markets, dictating terms to customers and employees, and accelerating to bankruptcy and financial crisis.

Cars aren’t diplomas, but besides the obvious differences between the fields, systemic similarities suggest a need to act for leadership asleep at the wheel.

Missed opportunities

I participated in an NYU committee to promote entrepreneurship. Nobody seemed to notice the irony in the following two items in one meeting’s agenda.

  1. A goal to attract large companies for student internships (leaving aside that corporate internships are not particularly entrepreneurial).
  2. Delays building a web page from difficulty finding developers.

Do you see the disconnect? In a school teaching students to build web pages, well-meaning professors overlooked their own page as an opportunity for students, moving students into corporations, and paying outsiders for what students could do.

How did this happen?

Cars then, universities now

American car makers in the 1960s delivered style and status over what customers wanted—safety, efficiency, economy, and reliability. They saw themselves as authoritative, so when competitors met that demand, they didn’t adapt and lost most of their market.

Likewise, American universities today deliver facts, abstract analysis, and credentials over developing students into mature citizens. Administrators and faculty also see themselves as authoritative. Universities appear poised to follow the Big 3.

I am a member of that community, with five Ivy League degrees, including a PhD and an MBA. I teach and coach leadership and entrepreneurship at NYU and Columbia. My goal is not to complain but to solve problems—in this case, to help universities serve students, families, employers, and society.

These problems hurt the schools, which compete and can lose, as the Big 3 did to Volkswagen and Toyota—once puny car makers. The problems don’t directly affect administrators’ and faculty’s paychecks, which exacerbates the problem.

University problems

Nearly all my teachers lectured. I started teaching that way too, motivating students through my grade-giving authority. Universities’ predominant model is “We know. You don’t. We will give you knowledge,” focusing on intellectual skills, neglecting social and emotional skills.

Schools choose what students can study and motivate by authority. Whatever content they teach, behaviorally they teach compliance. Knowledge, analysis, and compliance were valuable generations ago, in the age of the knowledge worker, not when facts are available instantaneously, as today.

Social and emotional skills—to communicate and behave so others share their needs so you can help them, for example—meet today’s students’ needs. From engineering to art and just plain citizenship, leadership and entrepreneurial skills are more valuable than writing analytical papers. Learning them requires social and emotional challenges, which don’t come through compliance.

A typical student review of an experiential course I taught reveals that however much they challenge students intellectually, even top schools don’t challenge them socially and emotionally:

As a senior, this was the first course that challenged me, asking me to think outside my comfort zones. Yet, it is also where I developed a strong network of supporters through group projects.

A student at an elite, globally-recognized university went seven semesters without challenge. Since the student wrote papers and took tests, I conclude the new challenges of my course were social and emotional.

Differences between then and now

The biggest differences between then and now are that companies no longer take forty years to go bankrupt and that we can learn from the past.

The equivalent for endowed universities isn’t bankruptcy. It’s the world’s top students going elsewhere or forgoing college altogether.

While few today could imagine Harvard losing its status, fewer would have imagined General Motors bankrupt either. What was good for GM was good for America. Yet bankrupt it went, as Toyota, whose cars Americans laughed at in the 60s, became the world’s largest car company. The Big 3’s share of the American market dropped from 90% to 45% and of the global market from 75% to just over 20%.

Red flags then and now

US car makers in the 1960s ignored red flags. Universities today face similar warnings.

The first for car makers was Unsafe at Any Speed. The book for actuaries went bestseller, documenting the failures of the Big 3’s big, fast, stylish dreamboats. They valued size, speed, comfort, and style. Unsafe at Any Speed showed that consumers valued safety, efficiency, and reliability, which carmakers neglected as unprofitable.

The second was the Volkswagen Beetle, and Japanese imports, which embodied what consumers wanted. For decades their sales grew under the Big 3’s noses.

Universities’ equivalent of Unsafe at Any Speed is Google no longer requiring college diplomas for its employees. Not an arbitrary decision by a maverick company, Google attracts the top students from top universities’ top programs. Its research found, according to Laszlo Bock, senior vice president of people operations at Google, that “GPAs are worthless as a criteria for hiring, and test scores are worthless—no correlation at all except for brand-new college grads, where there’s a slight correlation. Google famously used to ask everyone for a transcript and GPAs and test scores, but we don’t anymore, unless you’re just a few years out of school. We found that they don’t predict anything.”

Google found entrepreneurial activity—not necessarily business ventures, but taking initiative—predicted success. While universities increasingly teach entrepreneurship, many teach about entrepreneurship or specific business skills, not how to take initiative. Hence many of today’s top entrepreneurial leaders left universities: Gates, Winfrey, Dell, Combs, Zuckerberg, and Musk, for example.

Preparing students for jobs is only one purpose of a university. Universities also purport to develop students into responsible adults able to create meaning and purpose. But such development comes with social and emotional challenges and schools value GPAs, double majors, triple minors, and other credentials—from the Latin credo, to trust. The top leaders’ and Google’s defection shows that the world is losing trust in academic credentials. Credentials are universities’ equivalent of cars’ speed, power, and style.

As Bill Deresiewicz wrote in Don’t Send Your Kid to the Ivy League:

Elite schools like to boast that they teach their students how to think, but all they mean is that they train them in the analytic and rhetorical skills that are necessary for success in business and the professions. Everything is technocratic—the development of expertise—and everything is ultimately justified in technocratic terms.

So students don’t need universities to teach what society values. “For every 100 kids who start college, just 25 get degrees and attractive jobs. Some 45 drop out, and another 30 graduate but end up under- or unemployed,” reported Harvard Innovation Lab’s Expert-in-Residence Tony Wagner and philanthropist Ted Dintersmith.

Why do leaders reject academia?

Values.

As the Big 3 said, they valued transportation but delivered conspicuous consumption. Universities talk about developing leaders, but teach academic analysis, which doesn’t hurt, but doesn’t develop emotional and social skills either. Professors lack non-academic experience—they had to publish or they’d perish—so they can teach about leadership but not how to lead. Adjuncts with professional experience, meanwhile, are increasingly sidelined to the point of unionizing. (For that matter, graduate students are unionizing. Fewer flags are redder than your customers organizing against you.)

Why don’t universities change?

Despite misaligned interests, many universities are growing, building shiny new facilities and hiring staff.

How?

In large part, they’re lucky.

The parallel with the Big 3 continues. Unrelated to automakers’ decisions, the government built an interstate highway system and the population moved to the suburbs, ensuring decades of sales. The profits of these windfalls hid windfalls that came from not serving their customers.

Today’s universities’ equivalent is China and India sending students to the West. Ten minutes at any elite university will show its large and growing foreign populations. Luck is boosting universities’ revenues and competitiveness, not their decisions.

What’s wrong with easy money? Isn’t raising applicants’ competitiveness good?

How long do we expect China and India to send their top students to spend unthinkable amounts of money here without improving their own schools?

When they do, do we expect them to create schools based on failing pedagogy?

Or will they learn from the past, learning from Toyota and Volkswagen?

China’s and India’s schools may now teach by rote, but losing people and money motivates. As developing countries skipped land lines for cell phones and are skipping centralized power for local solar, why would they not skip more rote learning for experiential?

As US universities develop adversarial relations with their staffs (and graduate students), as the Big 3 did, why would we not expect educational initiatives abroad to follow the more successful Toyota Way?

Systemic change

American universities operate in a system that is stable only until it faces competition, as the Big 3 did. Changing a system requires treating it as a system. One of the key levers in human systems are its beliefs and goals. I see three main beliefs driving this system:

  1. “We are the stewards of an enduring tradition.”
  2. “Teaching facts develops growth and maturity.”
  3. “Professors know best how to teach young adults.”

On the contrary, American universities since World War II have deviated from a tradition of developing social and emotional skills, which don’t come from teaching facts, and professors increasingly lack non-academic experience.

My prescription

I don’t pretend to know all the answers, but the results of active, project-based learning applies beyond leadership and entrepreneurship courses. Students value the results, despite, or because of, working harder and struggling more, as this review of a project-based course suggests:

10/10 would take again! I loved every second of this class, but what’s cooler is that I think I may have loved the homework even more.

Teaching social and emotional skills doesn’t require teaching leadership or entrepreneurship, but to challenge them socially and emotionally with projects affecting people they care about.

I suggest that administrators and faculty adopt new beliefs about themselves. Instead of viewing themselves as authorities I suggest seeing themselves as leaders who serve the communities they lead. Instead of deriving power from authority, serving their communities by learning their interests and values, putting them first, and supporting them.

Second, I recommend that they adopt new views of students. The predominant view sees students as vessels to fill with knowledge. They view students as immature, needing schools to choose their values for them. Academia calls the end of school commencement because it thinks of “real life” commencing then.

As John Dewey said, “Education is not preparation for life; education is life itself. Education, therefore, is a process of living and not a preparation for future living.”

I propose seeing students as living “real life” here and now.

I also propose new ways for faculty and administrators to act. Many professors hold a few class discussions or other token activities and call their courses experiential. I suggest professors learn experiential learning from experienced practitioners, reported as effective and cost effective.

The Big 3 eventually learned from Toyota. Wouldn’t universities rather learn from history, than from bankruptcy?

Joshua is the author of the bestselling Leadership Step by Step and host of the award-winning Leadership and the Environment podcast. Learn how to write for Quartz Ideas. We welcome your comments at ideas@qz.com.

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