A article on the latest edition of American Interest Magazine drew a wide smile on my face. Not only was this article fact based and supported by loads of statistical data but it also echoed a sentiment I had been expressing for quite some time now.
The article titled “The End of University As We Know It” highlighted the rise of online education and predicted the eventual demise of the brick and mortar institutions that dominate the education world today.
During the last 7-8 years of my professional experience in the Information Technology field I have come across scores of colleagues who have epitomized higher education as the summit of professional excellence. Almost all of them seem to unanimously agree that an M.B.A. degree (for whatever reason unconnected whatsoever) is indeed the way ahead to a stable and secure future.
Its not surprising though that most Asian countries themselves place these management degrees on a pedestal and make it excruciatingly tough for students to gain entrance to these schools. This is then further compounded by a lofty fee structure levied upon the students for their courses. For this problem however, there is an easy solution. Banks are eternally ever-ready to dole out the finances needed for college education for worthy students.
This according to the article perpetuates a bubble. In my opinion this is a vicious inflationary cycle that drives up not only the cost of college education but a whole host of other supporting systems as well. Strangely though, not all colleges / universities should be painted with the same brush.
Consider this, the Top 10 universities in the US/India have something that most of the other universities do not possess in the same measure. They have a well-connected and highly influential alumnus. Most of the top jobs in Multinational firms have at some time in the past – hired grads from these B-Schools. This alumnus then works to ensure continuity, just like any other cartel would do except that this one is elite. Subsequent recruits would almost certainly be hired from the same institutes that they hailed from, thanks to their alumni. This is not necessarily bad though, unless of course, the other universities of a lesser God are deprived their right at the table because of some preconceived notions about academic excellence.
In Asia, This whole race for the MBA degree has spawned a sub-industry of sweat shops that cater to everything from MBA counseling (not career counseling) to agencies that churn out your Statement of Purpose. Most of the MBA coaching centers in India (for example) have 80% of their aspirants from the Information technology Field.
Hold on, but is there anything really wrong with this? Why is it wrong for today’s youth to aspire for better jobs, better money and a better lifestyle? Of course it isn’t, the only concern is that this unnatural love-affair for an MBA has skewed the playing field in a way that makes it a ticking time-bomb.
Consider the following example: –
Lets suppose, candidate A wishes to enroll for an MBA in a top notch university. He has to pay – $40,000 for the tuition fees. The fees are stiff but he gets a bank loan for 80% of the course. His loan for $32,000 now needs to be paid out as soon as he finishes his course.
However for him to break even, he would have to get a job that pays him at least double or triple that amount (~ $125,000 p.a.), so he could look forward to clearing his debt of in less than a year. However MBA salary hikes have been flat since the 2008 crash and even $110,000.p.a. are hard to come by these days. Here’s the catch, US companies are known to reward their managers with hefty bonuses and this more than makes up.
In India, MBA salaries have been shooting through the roof. If you’re from a premium Management Institute upon graduation, you would be earning at least 3-4 times what your peers are earning at your same level (graph attached) or sometimes even more.
So since the candidate will eventually recover his costs, the college would stick to this working model and keep increasing its tuition fee. College managements live with the surety that they will eventually be paid their dues by the banks. Students would never default on their loans since the market is headed in only one direction: it’s a win-win for all parties. In fact, a recent report by the GMAC council (who conduct the GMAT course) predict more jobs and higher pay for MBA’s in 2013 !!
This story reeks of familiarity with the sub-prime crisis, where everyone assumed that the market for housing never had a roof. The assumption that that the thirst for higher education will never recede can almost be construed as arrogant.
Here’s why the ceiling is not far off. The lackluster recovery has been spluttering on for about 3 years now and businesses have been bleeding ever since. Unemployment in the US is still hovering around the 7.8 mark and the despite the re-election of the incumbent, confidence hasn’t recovered. Discretionary spending from businesses would continue and this climate of uncertainty would soon see these astronomical salaries brought down to saner levels.
The supposed engines of growth for the 21st century, India and China are both chugging along with a lot of noise. While the elephant desperately tries to re-start its growth engine, the dragon tries to conceal its real GDP numbers in its own smoke. With all these tell-tale signs one would feel that the ceiling on senior managers pay should have been breached by now. However, with the cartels still in charge of Big Business, there is little hope for this to happen.
Even till date, after being bailed out, Wall Street continues to pay hefty bonuses to its top level management oblivious of the fact that the bonuses are not from their own sweat and toil but from taxpayers’ hard earned money. In India and China however, the middle class spending boom has just taken off and so there is probably more head-room till we hit the ceiling.
Whichever way you look at it, traditional methods of teaching are now running breathlessly on their last lap. The problem is like most of the changes, this one would be highly disruptive in nature. Thousands of students across the world would be able to tap into centers of excellence and enrich their minds at a fraction of the present cost. The elitists would diminish, cartels diluted and the halo of exclusivity that we see around these big named universities, would be ancient history .. hopefully for the better.
Article first published as The Worlds Most Elite Cartel on Technorati.