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Can Venture Capital Deliver on the Promise of the Public University?

By Robert Meister

An Open Letter to Daphne Koller, Co-Founder and Co-President of Coursera and Professor of Computer Science at Stanford University

Dear Professor Koller,

Because I share your vision of creating a world in which all have access to an excellent and empowering education, I would like to propose a new online course for you to make freely available through the Coursera platform. Its title is “The Implications of Coursera’s For-Profit Business Model for Global Public Education.”

You and your company’s compelling pitch to consumers suggests that the private sector—that is, venture capitalists and not taxpayers—can deliver a more equal world in which income will be based on the skills and knowledge people actually acquire rather than the unnecessarily-scarce credentials for which they are eligible and can afford to pay. It is natural to hope that in this more equal and more productive world, incomes could rise for everyone willing to acquire the necessary academic knowledge and take the tests to prove it. This, in fact, was exactly what was promised by the original California Master Plan for Higher Education, using taxpayers’ money, when it was adopted, in 1960.

My proposed course would ask students how and why venture capitalists are willing to provide an even greater abundance of knowledge in the service of greater economic and social equality than is the State of California.

As the course progresses, however, students would come to see that reducing income gaps through education is not the main problem that massive-open-online-course providers are trying to solve. That problem is, rather, how and when to price the content that you are giving away in your current (prepublic offering) phase of development.

Free MOOCs weaken the link between scarcity and quality on which the business model of all higher education, both public and private, unfortunately depends. By making your course-completion certificates widely available, you could threaten the ability of public universities to charge as much as they do now for keeping high-quality credentials relatively scarce.

But public colleges that are becoming more expensive and less accessible create a business opportunity for MOOCs, by widening socioeconomic spreads in access (based on selectivity), price (based on tuition), brand (based on reputation), and value (based on expected future earnings). Successful business models in the test-preparation and student-loan industries break down those spreads into ranks and then offer students the opportunity to jump, say, two ranks in a given scale, such as brand or expected income, by overcoming only one gap in another scale, such as SAT scores or tuition payments.

My students would soon see that a solution to Coursera’s pricing problem is to add to the spreads a new, and potentially global, database of performance spreads, based on the nearly continuous testing of students online.

Eventually, the students in my Coursera class would learn that data that they now provide to the company free—perhaps so that it can grade them—will be the private property of Coursera, which can then sell it back to them in the form of “services,” which could include their own performance record but also different “views” comparing it with that of students at better universities, those with higher test scores, or with advanced degrees. The possibilities for renting that information back to Coursera’s own students are endless, as are the possibilities of marketing your data and consulting services to makers of other educational and financial products.

My students would also learn that the foremost obstacle to immense profitability for Coursera’s investors is the need for someone such as the taxpayer to continue to maintain an educational system of high-enough quality and high-enough price so that Coursera can claim to provide something nearly equivalent for less.

Here students would get a lesson in politics: Fortunately for Coursera, there are now five bills pending in Sacramento that would require (in various ways) that the University of California, California State University, and California Community Colleges give “full academic credit” for online courses that are “equivalent” to their own.

If some students think California should go slow on MOOCs until we educators better understand their optimal use, I’d have the opportunity to teach them some important lessons about the role of money in politics. They would learn that the governor is involved in rushing MOOC legislation through, as are (almost certainly) the kinds of venture capitalists backing Coursera.

Full Letter

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