Disruption Alert: Higher Education

tl;dr: Recent admissions scandals and rapidly increasing costs put the US higher education market on the disruption watchlist.

Over on my personal blog, I have been questioning the value of college education as currently delivered in the US for many years now.

Don’t get me wrong, I am very much in favor of a traditional, liberal arts education. It’s just that I think much of what makes that education value has been hollowed out from many college curricula.

Even worse than that, however, is the rapidly inflating cost of college, fueled by cheap government, and the resulting, crushing debt that graduates have.

The final straw is that the college degree has long outlived its usefulness as a near-guarantee of a well-paying job.

Alternative Business Models for Education?

A few years ago, Fred Wilson had a blog post on the difference between technical innovation and business model innovation.

He suggested that business model innovation is more disruptive and pointed out the obvious enabler that technology can be in establishing new business models.

So, on the one hand, we have the macro-challenge of the declining relative value of a traditional degree (its value has essentially been eroded by inflation).

On the other hand, we have the tech disruptors of the past 20 years: the Internet, social, mobile, and now crypto.

Putting them all together, I expect we will see even more new experiments beyond for-profit colleges, MOOCs, Coursera, Udacity.

In the past, I’ve written about some of the crypto-education protocols and there are others like https://www.tutellus.io/

Plus, we’ve explored trends such as “More College Students Selling Stock–in Themselves.”

That is why I was really excited to learn about Lambda School.

Pay for Performance Education

I haven’t spoken to anyone at Lambda, nor can I endorse it outright, but from the website, it seems to be a smart business model innovation for the education market.

Education is free…sort of. You pay nothing upfront and then you pay a percentage of your post-college income.

It’s like Lambda is giving you education now in return for a dividend share of future earnings for a discrete period of time.

You can review the details yourself, if you are interested, but the basic formula is laid out.

I don’t know if it will work, but I LOVE the approach.

Managing Incentive-based Education

Now, add in the crypto part.

I would imagine that Lambda’s back-end operations are still somewhat manual. After all, I need a copy of your W2 (in the US) to prove income. Plus, we have to have an enforceable contract that allows Lambda to get its return.

This will all be a smart contract.

The student will have a crypto wallet into which Lambda will deposit a token upon completion of the course.

Since that diploma is the key to hiring for the employer, they will send paychecks only to the wallet with the degree.

Any paycheck that comes into that wallet will get tithed/cut and a portion automatically sent to Lambda.

I realize that implementing this is not easy and the technology is not there yet from a maturation point.

However, and this is the point we make over and over here, the technology does exist today to make this happen.

Tech, Timing and Model Converging

So, the higher education market faces three forces converging.

  • The arrival of crypto token-based systems with programmable capabilities for asset and wealth management (automatic tithing)
  • New educational business model experiments like Lambda that challenge the “pre-pay” model
  • A market that is increasingly frustrated with-and questioning the value of-the existing offerings.

Not only do I think it will be fascinating to watch, I think it is critical that these evolve.

Disruption Alert: Higher Education was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.