MBA tuition bubble update: Thoughts on the brave new world of MBA education

Here it is: MIT Announces Platform for Free Online Courses

MIT is planning to launch an open platform for free online classes, complete with certification for those who demonstrate mastery of their topics.

The key part of that sentence is the, “complete with certification” bit. I have to admit, that came faster than even I expected. As many who read this site will know, MIT has been running the OpenCourseWare site for 10 years which, according to this article, boasts 2,100 courses and has been used by 100 million people. Offering actual courses with instructor interaction and evaluation is new.

In related news, my good friend Scott Page (Leonid Hurwicz Professor of Complex Systems at Michigan) is going to teach a free online course on modeling in January that presently has over 10,000 people signed up. I understand the free online course in Technology Entrepreneurship being offered in Jan. by Stanford’s Chuck Eesley beats that by a factor of 3+. A couple of days ago, I commented to a colleague, “Well, when they figure out how to add the certification function, we’re in trouble.”

It is now official: we’re in trouble. In case it is not obvious, let me explain why. This technology removes a significant number of capacity constraints. Now, basically every student interested in, e.g.,  technology entrepreneurship can sign up for a course offered by one of the best researchers and most outstanding teachers at one of the world’s the top business schools … and obtain evidence of having completed it satisfactorily. Admittedly, the certification is not, for the moment, what it needs to be. For example, my guess is that verification of who is actually being assessed is not airtight. However, this technology will certainly evolve. At that point, why does Stanford need an admissions policy? Just let everyone who wants to take a shot at learning enroll and, then, let the chips fall where they may. Let’s face it, admissions procedures are notoriously inaccurate anyway.

Here’s a prediction about what will happen in the near future. With places like Stanford and MIT racking up tens of thousands of students for their free online courses, top-tier wannabes will have to follow suit. I can pretty much guarantee that sometime soon your dean will figure out that having thousands of students enrolled in your free online courses will be a necessary component of marketing the bricks-and-mortar program. The fear will be that schools that don’t offer such programs won’t be taken seriously. And, ultimately, I think, that fear will be well-founded. Also, given the fact that every university enjoys government subsidies of some kind or another, there will be major political pressure to provide the social good of low-cost, open access courses.

Then, eventually, the marketing device will actually become the core educational product. What will that wold be like? Will we see Stanford or HBS or Chicago become the of MBA education? At p = 0 pricing, does everyone but a few super-programs go out of business? If so, would that have the perverse effect of turning university-based b-schools into pure, state-supported research institutions?

Folks have long argued whether MBA education is more about learning things versus providing aspiring business managers with a signaling device (see, e.g., Ezra Zuckerman’s comments to my related post over at . If I had to make a conjecture, at least for the medium-term, I believe that the online course technology is going to make the split between the signaling and actual learning functions more pronounced. The bricks-and-mortar programs will be all about signaling and the online courses will be mostly about learning content. In their refined role, the bricks-and-mortar MBA will continue to be pricey and even more about being accepted into one’s aspirational social network, much like the private mens clubs of the 18th and 19th centuries. At the same time, those who are interested in learning graduate-level business content will be able to do so at relatively little cost online (though, this too will serve as a signal in its own right and may even be a requirement to admission to the social club, er, full-time MBA program).

What happens in the long-run is less obvious.  After all, once the local, full-time MBA experience becomes pure signaling and social networking, it will face numerous substitutes. After all, there are lots of ways to burn money … and bona fide social clubs still exist. What then?

Finally, there is the question of what happens to the business research community? While I can easily imagine a superstars market evolving, in which the Scott Pages and Chuck Eesleys of the world educate a massive share of the market, I also see an educational role for those doing relevant, state-of-the-art research. Those of us who manage to establish international research reputations are, almost by definition, in possession of scarce, valuable knowledge.  Therefore, I am reasonably optimistic that most of us will continue to make a living doing some facsimile of our present jobs. Whether richer or leaner, I can’t say — the monetization model of the future is opaque.



5 Comments on “MBA tuition bubble update: Thoughts on the brave new world of MBA education”

  1. srp says:

    Certification is the serpent in Eden for the MIT project. Without certification, the incentive alignment between student and faculty is very high, and students can sort to classes on a purely interest/style/content/level basis. Once you start producing a credential, you attract a different crowd and a different set of motivations. This may indeed be the model of the future, but the folks at MIT are about to find that they are no longer going to be treated as pure do-gooders and their on-line students are likely to get a lot more demanding, as will employers.

  2. RussCoff says:

    The implication here seems to be that experiential learning and tacit knowledge do not play much of a role in being able to absorb and apply the content. That is to say, the more codifiable is the knowledge base, the more online learning can substitute for the traditional classroom.

    Granted, ultimately, there will be more experiential components (simulations, etc.) infused in online course offerings. However, the best MBA programs draw on rich interaction around case analyses that are hard to to fully duplicate in an online environment — I know, I’ve tried threaded case discussion.

    In addition, most MBA programs offer directed field studies where students can get their hands dirty in a context where they are expected to apply what they have learned.

    Some of this experiential learning can be accomplished online but it is much less scalable than the codified components (which, frankly, can be often be delivered more effectively with a good book). That is, it requires students to work in teams and get feedback on their effectiveness.

    As such, a free model with thousands of students at once, cannot produce the learning that will matter most to employers — sound judgment when the problem cannot be fully codified. Furthermore, while certification may be troublesome, its worth depends on the quality of the assessment which is unlikely to capture these tacit components effectively any time soon.

    The more MIT and others produce free courses with thousands of enrollees who do not work closely with others, the less threatened will be the traditional MBA model. After all, textbooks on these topics have been available for years (at cheap rates for used versions or even free in libraries). Somehow that did not turn out to be much of a threat.

  3. @mdryall says:

    Hi Russ. I guess I would have to stop you at the assertion that the “best MBA programs draw on rich interaction around case analyses.” Maybe. My own assessment is that case discussions give students an “aha” moment around what essentially amounts to a bullet point, thereby making them feel as if significant learning is occurring when, in fact, they are learning very little. Even if we stipulate that experiential learning is central, there are many ways to get that besides paying huge tuitions to us — e.g., working in a real job for two years applying stuff they learned through free MIT courses.

  4. Bob Murphy says:

    Hi Dr. Ryall,

    I’m a software engineer looking to enter a Phd in Strategic Management. I have to say posts like this give me pause. I really love strategy, particularly mathematical sociological approaches. Nevertheless, despite my passion for it–as someone 30, I find the prospect of wrapping up a phd at 35-36 and entering a world of rapidly diminishing demand for business faculty disturbing. My friends remind me I’m passionate about the research; I remind them that I will have to put food on the table when I’m done.

    What kind of business model do you think would exist to support strategy research? I would like nothing more than to do research at a top tier institution; however, not all of us can be superstars. I will most certainly try to be but can’t assume I will be. If the middle of the mba market disappears, what jobs will there be for strategy profs who are not superstars like Jason Davis/Eisenhardt?

    My nightmare scenario is this:

    Stage 1:
    a) Schools engage in heavy tuition discounting (already happening through increased scholarships) to deal with diminished demand.
    b) Schools in the middle–heavily in debt from overbuilding and without endowments–are forced to lower tuition, increase teaching loads and stop hiring.

    Stage 2:
    a) Schools at the top create online courses, develop some credentialing method for these online courses
    b) Schools at the middle/lower end of the spectrum–needing to compete with both lower costs at the top and the lower cost alternatives at the top –increasingly use adjuncts to teach/combined with materials from these online courses. Head counts in the middle continue to shrink.
    c) Lower enrollment across the board as the MBA’s value continues to decline. The decline seems inevitable because it is in each school’s interest to maximize tuition revenue but its only collectively in schools interest to maintain the value of the credential. In addition, consulting and finance will continue to run into structural/geopolitical headwinds that will reduce their demand for MBAs.

    Stage 3:
    a) Phd programs contract dramatically. This combined with reduced standing faculty headcount threatens strategic management as a discipline.
    b) New Phds–those that are still around–face a job market where you either are a superstar or unemployed.
    c) Financially mismanaged MBA programs–those that held on to the growth model despite market conditions–start buying out faculty (as the University of Vermont has some law faculty) and shutter.

    Stage 4 (endpoint of process):
    a) There is a flight to rigor at the top of the market to differentiate from lower cost alternatives; the MBA starts to resemble a graduate degree again at select institutions.
    b) Lower tier, state MBA programs are primarily taught by adjuncts and online materials.

    I’m not sure if this is just a sky is falling reaction. Nevertheless, when I see a combination of lower cost alternatives, declining enrollment, highly leveraged institutions–I wonder what the business model is going to be to support the research I truly love.

    Is this path or trajectory likely? Are there implications I am not seeing?

  5. Johng547 says:

    I’m glad that it turned out so effectively and I hope it will continue in the future because it is so worthwhile and meaningful to the community. gbaddddcaecf

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s