In 2017, Scott Galloway anticipated Amazon’s $13.7 billion purchase of Whole Foods a month before it was announced. Last year, he called WeWork on its “seriously loco” $47 billion valuation a month before the company’s IPO imploded. Now, Galloway, a Silicon Valley runaway who teaches marketing at NYU Stern School of Business, believes the pandemic has greased the wheels for big tech’s entrée into higher education. The post-pandemic future, he says, will entail partnerships between the largest tech companies in the world and elite universities. MIT@Google. iStanford. HarvardxFacebook. According to Galloway, these partnerships will allow universities to expand enrollment dramatically by offering hybrid online-offline degrees, the affordability and value of which will seismically alter the landscape of higher education. Galloway, who also founded his own virtual classroom start-up, predicts hundreds, if not thousands, of brick-and-mortar universities will go out of business and those that remain will have student bodies composed primarily of the children of the one percent.
At the same time, more people than ever will have access to a solid education, albeit one that is delivered mostly over the internet. The partnerships he envisions will make life easier for hundreds of millions of people while sapping humanity of a face-to face system of learning that has evolved over centuries. Of course, it will also make a handful of people very, very rich. It may not be long before Galloway’s predictions are put to the test.
Colleges and universities are scrambling to figure out what to do next year if students can’t come back to campus. Half the schools have pushed back their May 1 deadlines for accepting seats. What do you expect to happen over the next month?
There’s a recognition that education — the value, the price, the product — has fundamentally shifted. The value of education has been substantially degraded. There’s the education certification and then there’s the experience part of college. The experience part of it is down to zero, and the education part has been dramatically reduced. You get a degree that, over time, will be reduced in value as we realize it’s not the same to be a graduate of a liberal-arts college if you never went to campus. You can see already how students and their parents are responding.
At universities, we’re having constant meetings, and we’ve all adopted this narrative of “This is unprecedented, and we’re in this together,” which is Latin for “We’re not lowering our prices, bitches.” Universities are still in a period of consensual hallucination with each saying, “We’re going to maintain these prices for what has become, overnight, a dramatically less compelling product offering.”
In fact, the coronavirus is forcing people to take a hard look at that $51,000 tuition they’re spending. Even wealthy people just can’t swallow the jagged pill of tuition if it doesn’t involve getting to send their kids away for four years. It’s like, “Wait, my kid’s going to be home most of the year? Staring at a computer screen?” There’s this horrific awakening being delivered via Zoom of just how substandard and overpriced education is at every level. I can’t tell you the number of people who have asked me, “Should my kid consider taking a gap year?”
What do you tell them?
I tell them it’s a great year to take a gap year. I think most 18-year-olds are not prepared for college. A combination of helicopter parenting and social media have stunted and arrested the development of America’s youth. University administrators have unwittingly become mental-health counselors. I think a lot of young people, especially boys, could use another year of seasoning experience, work experience, or some sort of service. A lot of these kids just aren’t ready for the competition and the kind of intense environment that is college.
When will there be a reckoning? It has to come before classes begin this fall.
Over the next six weeks, when we realize that the deposits and registrations for the fall are down 10 to 30 percent. The better universities are fine in the short term because they just fill spots from the waiting lists. The kid who’s going to Boston College will get into MIT. But if that snakes down the supply chain, and you start getting to universities that don’t have waiting lists, those are the ones that get hit.
How many schools will collapse between now and next year?
It will be like department stores in 2018. Everyone will recognize they’re going out of business, but it will take longer than people think. There will be a lot of zombie universities. Alumni will step in to help. They’ll cut costs to figure out how to stay alive, but they’ll effectively be the walking dead. I don’t think you’re going to see massive shutdowns, but there’s going to be a strain on tier-two colleges.
There will be a dip, the mother of all V’s, among the top-50 universities, where the revenues are hit in the short run and then technology will expand their enrollments and they will come back stronger. In ten years, it’s feasible to think that MIT doesn’t welcome 1,000 freshmen to campus; it welcomes 10,000. What that means is the top-20 universities globally are going to become even stronger. What it also means is that universities Nos. 20 to 50 are fine. But Nos. 50 to 1,000 go out of business or become a shadow of themselves. I don’t want to say that education is going to be reinvented, but it’s going to be dramatically different.
How?
Ultimately, universities are going to partner with companies to help them expand. I think that partnership will look something like MIT and Google partnering. Microsoft and Berkeley. Big-tech companies are about to enter education and health care in a big way, not because they want to but because they have to.
Let’s look at Apple. It does something like $250 billion a year in revenue. Apple has to convince its stockholders that its stock price will double in five years, otherwise its stockholders will go buy Salesforce or Zoom or some other stock. Apple doesn’t need to double revenue to double its stock price, but it needs to increase it by 60 or 80 percent. That means, in the next five years, Apple probably needs to increase its revenue base by $150 billion. To do this, you have to go big-game hunting. You can’t feed a city raising squirrels. Those big-tech companies have to turn their eyes to new prey, the list of which gets pretty short pretty fast if you look at how big these industries need to be in that weight class. Things like automobiles. They’ll be in the brains of automobiles, but they don’t want to be in the business of manufacturing automobiles because it’s a shitty, low-margin business. The rest of the list is government, defense, education, and health care. People ask if big tech wants to get into education and health care, and I say no, they have to get into education and health care. They have no choice.
The strongest brand in the world is not Apple or Mercedes-Benz or Coca-Cola. The strongest brands are MIT, Oxford, and Stanford. Academics and administrators at the top universities have decided over the last 30 years that we’re no longer public servants; we’re luxury goods. We get a lot of ego gratification every time our deans stand up in front of the faculty and say, “This year, we didn’t reject 85 percent of applicants; we rejected 87 percent!,” and there’s a huge round of applause. That is tantamount to the head of a homeless shelter bragging about turning away nine of ten people who showed up last night. We as academics and administrators have lost the script. It’s not true of everyone. The chancellor at Berkeley is working hard to expand seats. I think the University of California and the University of Texas both see that it’s important that those seats expand as the population grows.
But the ultimate vehicle for a luxury item is to massively and almost artificially constrain supply. Birkin bags are $12,000 because they create the illusion of scarcity. I’ll have 170 kids in my brand-strategy class in the fall. We charge them $7,000 per student. That’s $1.2 million that we get for 12 nights of me in a classroom. $100,000 a night. The gross margins on that offering are somewhere between 92 and 96 points. There is no other product in the world that’s been able to sustain 90-plus points of margin for this long at this high of a price point. Ferrari can’t do it. Hermès can’t do it. Apple can’t do it. Apple’s gross margins are 38 points. Hermès and luxury goods are somewhere between 50 and 60 points. There has never been a luxury item that’s been able to garner the type of gross margins as university education.
At the same time, more people than ever will have access to a solid education, albeit one that is delivered mostly over the internet. The partnerships he envisions will make life easier for hundreds of millions of people while sapping humanity of a face-to face system of learning that has evolved over centuries. Of course, it will also make a handful of people very, very rich. It may not be long before Galloway’s predictions are put to the test.Colleges and universities are scrambling to figure out what to do next year if students can’t come back to campus. Half the schools have pushed back their May 1 deadlines for accepting seats. What do you expect to happen over the next month?
There’s a recognition that education — the value, the price, the product — has fundamentally shifted. The value of education has been substantially degraded. There’s the education certification and then there’s the experience part of college. The experience part of it is down to zero, and the education part has been dramatically reduced. You get a degree that, over time, will be reduced in value as we realize it’s not the same to be a graduate of a liberal-arts college if you never went to campus. You can see already how students and their parents are responding.
At universities, we’re having constant meetings, and we’ve all adopted this narrative of “This is unprecedented, and we’re in this together,” which is Latin for “We’re not lowering our prices, bitches.” Universities are still in a period of consensual hallucination with each saying, “We’re going to maintain these prices for what has become, overnight, a dramatically less compelling product offering.”
In fact, the coronavirus is forcing people to take a hard look at that $51,000 tuition they’re spending. Even wealthy people just can’t swallow the jagged pill of tuition if it doesn’t involve getting to send their kids away for four years. It’s like, “Wait, my kid’s going to be home most of the year? Staring at a computer screen?” There’s this horrific awakening being delivered via Zoom of just how substandard and overpriced education is at every level. I can’t tell you the number of people who have asked me, “Should my kid consider taking a gap year?”
What do you tell them?
I tell them it’s a great year to take a gap year. I think most 18-year-olds are not prepared for college. A combination of helicopter parenting and social media have stunted and arrested the development of America’s youth. University administrators have unwittingly become mental-health counselors. I think a lot of young people, especially boys, could use another year of seasoning experience, work experience, or some sort of service. A lot of these kids just aren’t ready for the competition and the kind of intense environment that is college.
When will there be a reckoning? It has to come before classes begin this fall.
Over the next six weeks, when we realize that the deposits and registrations for the fall are down 10 to 30 percent. The better universities are fine in the short term because they just fill spots from the waiting lists. The kid who’s going to Boston College will get into MIT. But if that snakes down the supply chain, and you start getting to universities that don’t have waiting lists, those are the ones that get hit.
How many schools will collapse between now and next year?
It will be like department stores in 2018. Everyone will recognize they’re going out of business, but it will take longer than people think. There will be a lot of zombie universities. Alumni will step in to help. They’ll cut costs to figure out how to stay alive, but they’ll effectively be the walking dead. I don’t think you’re going to see massive shutdowns, but there’s going to be a strain on tier-two colleges.
There will be a dip, the mother of all V’s, among the top-50 universities, where the revenues are hit in the short run and then technology will expand their enrollments and they will come back stronger. In ten years, it’s feasible to think that MIT doesn’t welcome 1,000 freshmen to campus; it welcomes 10,000. What that means is the top-20 universities globally are going to become even stronger. What it also means is that universities Nos. 20 to 50 are fine. But Nos. 50 to 1,000 go out of business or become a shadow of themselves. I don’t want to say that education is going to be reinvented, but it’s going to be dramatically different.
How?
Ultimately, universities are going to partner with companies to help them expand. I think that partnership will look something like MIT and Google partnering. Microsoft and Berkeley. Big-tech companies are about to enter education and health care in a big way, not because they want to but because they have to.
Let’s look at Apple. It does something like $250 billion a year in revenue. Apple has to convince its stockholders that its stock price will double in five years, otherwise its stockholders will go buy Salesforce or Zoom or some other stock. Apple doesn’t need to double revenue to double its stock price, but it needs to increase it by 60 or 80 percent. That means, in the next five years, Apple probably needs to increase its revenue base by $150 billion. To do this, you have to go big-game hunting. You can’t feed a city raising squirrels. Those big-tech companies have to turn their eyes to new prey, the list of which gets pretty short pretty fast if you look at how big these industries need to be in that weight class. Things like automobiles. They’ll be in the brains of automobiles, but they don’t want to be in the business of manufacturing automobiles because it’s a shitty, low-margin business. The rest of the list is government, defense, education, and health care. People ask if big tech wants to get into education and health care, and I say no, they have to get into education and health care. They have no choice.
The strongest brand in the world is not Apple or Mercedes-Benz or Coca-Cola. The strongest brands are MIT, Oxford, and Stanford. Academics and administrators at the top universities have decided over the last 30 years that we’re no longer public servants; we’re luxury goods. We get a lot of ego gratification every time our deans stand up in front of the faculty and say, “This year, we didn’t reject 85 percent of applicants; we rejected 87 percent!,” and there’s a huge round of applause. That is tantamount to the head of a homeless shelter bragging about turning away nine of ten people who showed up last night. We as academics and administrators have lost the script. It’s not true of everyone. The chancellor at Berkeley is working hard to expand seats. I think the University of California and the University of Texas both see that it’s important that those seats expand as the population grows.
But the ultimate vehicle for a luxury item is to massively and almost artificially constrain supply. Birkin bags are $12,000 because they create the illusion of scarcity. I’ll have 170 kids in my brand-strategy class in the fall. We charge them $7,000 per student. That’s $1.2 million that we get for 12 nights of me in a classroom. $100,000 a night. The gross margins on that offering are somewhere between 92 and 96 points. There is no other product in the world that’s been able to sustain 90-plus points of margin for this long at this high of a price point. Ferrari can’t do it. Hermès can’t do it. Apple can’t do it. Apple’s gross margins are 38 points. Hermès and luxury goods are somewhere between 50 and 60 points. There has never been a luxury item that’s been able to garner the type of gross margins as university education.
by James D. Walsh, NY Magazine | Read more:
Image: Joe Darrow
