To Strengthen a Learning Community of Safety and Trust

“She was shaking inside. She didn’t hurt anymore, but what had happened inside her?…So horrible, so horrible…Charlotte felt dirty and sore.” –Tom Wolfe, I Am Charlotte Simmons (pgs. 522-523)

Tom Wolfe’s blistering satire of higher education includes a long episode of seduction that culminates in date rape. The central figure of the story, Charlotte Simmons, is shattered by the experience and only survives the vaulting cynicism of those around her through the kindness of strangers and strengths of which she was unaware. It is the most troubing satire I’ve read.

Wolfe’s novel came back to me as I read the recent article about an alleged gang-rape of a first-year student at a UVA fraternity in 2012. The behavior depicted in that article mirrors so many details in Wolfe’s novel that it constitutes a nightmarish instance of life imitating art.

In some emails, tweets, and phone calls, members of Darden’s worldwide community want to know our stand on the article—in effect, they ask, is UVA like Tom Wolfe’s cynical university?

No! UVA does not tolerate violence, including sexual violence, in any form. Rape is an abominable crime. Darden stands with the University community in our anger at the alleged actions described in the article. I write today to express my outrage, to extend my support to survivors of sexual abuse, and to encourage everyone to reflect on what each can do strengthen safety and trust in our community. As we teach, organizational excellence is defined less by the absence of bad events, and more by what the organizations do about them. Let’s set things right.

The first step is to suspend disbelief. The alleged events in the article exceed one’s grasp. UVA President Terry Sullivan has called for a criminal investigation of the attack, which will establish the facts. No matter how this investigation turns out, sexual abuse is bigger and closer than you may think. Headlines in recent years have arrested our attention with reports of sexual violence by celebrities, athletes, and institutional officials. One survey found that nearly one in five American women had been raped or experienced an attempted rape.

Second, speak up for what you value. Tell your co-workers, stakeholders, and family that sexual violence exists in many parts of the world, including our own. It can derail lives; and it is wrong. If America names the crisis, we are on the road to restoring safety and trust. Judging by public revulsion at the news reports and survey results, American society seems at last to be pivoting away from tolerance for aggressive sexual behavior. The spotlight is now on the University. This community of trust and honor must create something better. And we will.

Third, act on behalf of our values and vision for society. If you see something, say something. Be aware of how situations may veer toward abuse—then, intervene.

I encourage everyone to get educated on the topic. Share information and resources. And learn about the options and the policies. UVA Today is publishing a list of important University of Virginia messages regarding sexual assault, including the statement issued yesterday by President Sullivan. Darden students can gain insights from the Darden Office of Student Affairs and the policy document, Student Sexual Misconduct: What You Need to Know. The “For Students” section of UVA’s Sexual Misconduct Reporting Website includes an expanded list of resources: see the Staying Safe Tip Sheet. Last month, Terry Sullivan announced a campaign to encourage bystander intervention, “Not On Our Grounds.” And to support this effort, students have produced a video, Hoos Got Your Back, that involves students, faculty, staff, Corner merchants and other members of the University community.

The “For Employees” section of  UVA’s Sexual Misconduct Reporting Website includes the reporting policy and FAQs.  And the UVA Alumni Association has set up an online portal for UVA alumni to express their concerns, thoughts and recommendations for the University on the subject of sexual misconduct on Grounds. The Alumni Association will collect all responses and deliver them to the University.

Another practical way you can help is provided by President Sullivan. The newly proposed student sexual misconduct policy is available for review and public comment. Read the Executive Summary, then the full policy and provide candid feedback by December 5.

Lastly, I invite members of the Darden community to share their concerns and suggestions directly with me at

The thoughts and prayers of the Darden Community go out to all survivors of sexual violence—and to their caregivers. We must collectively “take back the night” of sexual misconduct, along with the indifference, cynicism, and despair that nurture it. Our Thanksgiving holiday this week lends an opportunity to reflect on what we can do—both as a community and as individuals—to strengthen UVA as an oasis for learning and a community of safety and trust. Let’s rally behind all of these efforts.


Optimistic Investors

We just concluded the 7th annual University of Virginia Investing Conference (UVIC). For the first time in seven years, I (and many veteran participants) emerged from the conference rather buoyant. Professional investors tend not to be wild-and-crazy personalities: phrases like “prudent fiduciary” and “careful analyst” appear with some regularity at our conference. Therefore, the optimism among keynoters, panelists, and the audience arrested me. Let me tell you why…and what caught my attention.

The Context

We chose the conference theme of “Investing in Innovation” to recognize that the only real economic recovery for America would come from the creation of new value. And ultimately, innovation in products and services is what creates new value. Thus, we asked the range of speakers to brief us on some themes that represent promising investment opportunities.

For the past six years, investors have struggled with the Global Financial Crisis, Great Recession, gridlock in Washington, and sequestration. And just in the past few months, the news has not been the happiest: market volatility, plunging commodity prices, deflation in Europe, geopolitical uncertainties, ISIS, and ebola. Some pundits have been forecasting that this decade would echo the “lost decade” of 2000-2009. I was rather prepared for another dour narrative.

Instead, what we heard was simply tonic.

The Themes

Energy renaissance. Bob Craine, an independent producer, and Barnes Hauptfuhrer, a private equity investor, argued that horizontal drilling techniques are revolutionizing the production of gas and oil in the U.S. Energy independence and the export of hydrocarbons, will strengthen America’s trade balance, increase the Federal budget, and permit America to reduce its dependence on nation-states in the Middle East and elsewhere. Low prices and the location of gas fields near industrial centers will stimulate a manufacturing renaissance in America. The impact of these developments will have a long duration. However, recent declines in the price of oil will have an asymmetric impact on the energy producers and will affect M&A activity in that field. Investors should focus on the most efficient producers, who can make a profit even if oil drops to $70/barrel.

Digital healthcare. The high cost of health care will be ameliorated by digital technology—this isn’t just digitization of medical records. Digitization entails making biology predictable through the collection of data, the subsequent analysis of each patient’s health, and the delivery of therapies to treat the specific needs of patients. Medicine will become “personalized.” The sense of panelists Bob Hugin, Sam Isaly, Bryan Johnson, and Bob Hariri was that Obamacare is here to stay, though we are likely to see significant amendments to the healthcare legislation. Bryan Johnson said that “the returns in programmable biology will be astronomical,” as if the operating system of the medical system were completely rewritten.

Cybersecurity. Kathy Warden asserted that one of the biggest issues in technology is how to defend against cyberattacks. Everyone is at risk for these attacks, launched by both individuals and nation-states. Therefore, investment in “predictive threat detection” will be needed and well-rewarded. CEOs will find the budget to cover such investments because the consequences of failing to defend against such risks are huge.

Abundance. Peter Diamandis, the founder of the X-Prize, told us that the news media overemphasize negative news, when in fact human existence is getting better and better at an exponential rate. He offered a host of metrics in areas such as digitization of information, dematerialization, democratization, and demonetization. “100 years old will become the new 60.” Healthcare and education will experience “massive disruption.” In the process of realizing this new abundance, whole industries will be disrupted: “linear thinking companies will be disrupted by exponential-thinking” innovators. Diamandis plugged his new book, Abundance: The Future Is Better Than You Think, which elaborates on the thesis. A question from the audience prompted Diamandis to say that his two favorite investment areas are human longevity and planetary exploration—he is actively exploring the possibility of mining asteroids.

Information technology. Ned Hooper said that some pundits had decried the decline in R&D by corporations. Yet he showed data that the rate of innovation in information technology had in fact never declined and instead had been growing exponentially. Microprocessors, solid-state storage, cloud computing, mobility and wireless (“everything connected everywhere wirelessly”), cloud software platforms, and data gathering and analytics—all of these areas show breakout rates of growth. A panel including Hooper, Charles Cory, John Siegel, and Michael Sola identified some specific sectors of information technology for special attention: the cloud (such as Amazon Web Services), software as a service (SaaS), and security. In response to a question from the audience, John Siegel said that he expected four firms to emerge as significant players from the current tech environment: Google, Microsoft (yes, a turnaround under the new CEO), Amazon, and IBM. Memorable quotes: “One thing you get in tech is a very short memory” (Ned Hooper); “Find a seam in a large growth market and work it hard” (Hooper), “Strategy is for amateurs; operations is for professionals” (Hooper quoting General George S. Patton), “we’ve seen a dramatic decline in the risk premium for investing in growth” (Hooper), “as costs of computing and storage go to zero, security becomes more important” (Cory), “ CEOs will find funds for security because being vulnerable to hacking is a risk for which CEOs can get fired” (Cory), “Amazon has great staying power; it’s not about generating earnings but about disrupting markets” (Sola), “Amazon is really the most advanced distribution company in the world, an interesting merchant enabled by technology rather than a tech company” (Cory). In response to a question from the audience, the panel asked for a show of hands: “are you more concerned about cybersecurity or privacy?” The audience voted heavily for cybersecurity.

Big pivot. Nancy Lazar urged us to close the book on everything we know. We are paying too much attention to the bad conditions of the past few years. Instead, the fundamentals point to the fact that America is at a turning point toward prosperity, much as it was in the early 1980s. She said, “I am exceptionally bullish on the U.S.” These fundamentals include the plunge in the price of hydrocarbons, the decline in global short-term interest rates, deleveraging of the U.S. economy, growth in U.S. bank loans, growth in U.S. government spending, growth in real private GDP and capital spending, a “smarter” U.S. consumer, a moderate housing recovery, the manufacturing renaissance, and the “huge strengthening” of the dollar. I cannot remember having heard a more buoyant economist.

Argentina. Kyle Bass lent a surprising close to the conference with a presentation on the attractiveness of investing in Argentina’s sovereign debt. He is an event-driven investor who looks for outsized returns based on an assessment of probabilities—in the case of Argentina, these assessments consider the resolution of court cases, the actions of “hold-out” investors, and the outcome of a forthcoming Presidential election there. Bass said that he, too, is “bullish on the U.S.” and believes that we will see a massively strong dollar. He also quoted a statement by Ben Bernanke in a private meeting that “interest rates will not normalize in our lifetime.”

Advice to students.

1. Learn to code—not to be professional software coders, but to be able to talk to those who are. (Cory)

2. Develop an ability to think creatively (differently and faster). (Johnson)

3. Think hard about risk: evaluate it, assess your appetite for it. And be careful of the obvious: to be in a “low risk” job in a firm and industry that are “low risk” may mean that you are ripe for disruption and therefore in an extremely risky place. (Hooper)

My take

Are happy times here again? Maybe. All this talk about disruption means that we may face a rather volatile era: winners winning a lot; losers losing a lot. Some folks are likely to wind up worse off. As automation and artificial intelligence displace workers in the middle of corporate organizations, we’re likely to see some arresting developments—I’ve blogged earlier about this point and referenced a book by Brynjolfson and McAfee who provide a longer discussion. During a break, one participant said that the vaulting tech forecasts seemed a bit arrogant in the face of the possible human cost.

All of the forecasts at this conference suggest to me that America may be where it was in, say the mid-1930s or late 1870s: times of enormous technological, political, and social change. In such times it is better to be relatively young, well-educated, with a strong social network, and relatively risk-tolerant. These are interesting times—which reminds me of the apocryphal Chinese curse, “May you be born in interesting times.”

We’ll convene the University of Virginia Investing Conference again next year. Watch the website of the Richard A. Mayo Center for Asset Management for forthcoming details. And if you find these notes interesting, join us next year!

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The Happy Warrior

”WHO is the happy Warrior? Who is he
What every man in arms should wish to be?“

—Character of the Happy Warrior” by William Wordsworth, 1806

Two days ago, I hosted the Darden Military Association of students at our home for dinner. It’s an annual event that my wife and I hold to thank our veterans for their service and to reflect a bit on what that service teaches us. In some brief remarks, I read from William Wordsworth’s poem.

Wordsworth composed “Character of the Happy Warrior” following the death of Horatio Nelson at the battle of Trafalgar in 1806. Presumably, Wordsworth was describing Nelson’s character. But the attributes are instructive to us all; the character he describes is one that I see in many of Darden’s veteran students. Consider the attributes that Wordsworth cites: a “generous spirit;” an “inward light”; a diligent learner with a “natural instinct to discern;” controls fear; is self-knowledgeable; “owes to virtue every triumph that he knows;” keeps faithful; and “finds comfort in himself and in his cause.” I hear from students, faculty, staff, alumni, and recruiters an appreciation for qualities such as these that they see in our veteran students.

But are our veterans, America’s returning warriors, happy? The transition from military to civilian life is a hard road. This morning, Will Kohlbrenner (D’15) gave a remarkable talk at First Coffee on the plight of many returning veterans. Among other details he cited were that

  • (75%) of veterans are unable to translate skills from the military to civilian life.
  • 30.2% of veterans aged 18 to 24 are unemployed as of 2011 BLS data.
  • 968,000 veterans (age 18 to 64) had been in poverty within the last year in 2010.
  • Over half of all homeless veterans are African-American, despite the fact that only 11% of the total veteran population are African-American.

Will noted that a few companies are working on not just hiring vets, but investing in them and training them, including Amazon, Troops 2 Roughnecks (trains service members to work on oil rigs), GE Junior Officer Leadership Program, and Prudential Financial. John Strangfeld (D’77), Prudential’s Chairman and CEO, has been a leader in the developmentof the business world’s response to the plight of returning veterans. Additionally, two Second Year students, JT Pruitt and Steven Benz, are working with Prudential and John Strangfeld in writing a case detailing this program.

Darden is committed to working with returning veterans, and indeed, with people from many fields who have volunteered to put themselves in a difficult way for the sake of others—these include students from the Peace Corps, Teach for America, law enforcement, NGOs, and public service. They all inspire us with the attributes of the happy warrior.

Character of the Happy Warrior

William Wordsworth (1770–1850)

WHO is the happy Warrior? Who is he

What every man in arms should wish to be?

—It is the generous Spirit, who, when brought

Among the tasks of real life, hath wrought

Upon the plan that pleased his childish thought:

Whose high endeavours are an inward light

That makes the path before him always bright:

Who, with a natural instinct to discern

What knowledge can perform, is diligent to learn,

Abides by this resolve, and stops not there,

But makes his moral being his prime care;

Who, doomed to go in company with Pain,

And Fear, and Bloodshed, miserable train!

Turns his necessity to glorious gain;

In face of these doth exercise a power

Which is our human nature’s highest dower;

Controls them and subdues, transmutes, bereaves

Of their bad influence, and their good receives:

By objects, which might force the soul to abate

Her feeling, rendered more compassionate;

Is placable—because occasions rise

So often that demand such sacrifice;

More skilful in self-knowledge, even more pure,

As tempted more; more able to endure,

As more exposed to suffering and distress;

Thence, also, more alive to tenderness.

—’Tis he whose law is reason; who depends

Upon that law as on the best of friends;

Whence, in a state where men are tempted still

To evil for a guard against worse ill,

And what in quality or act is best

Doth seldom on a right foundation rest,

He labours good on good to fix, and owes

To virtue every triumph that he knows:

—Who, if he rise to station of command,

Rises by open means; and there will stand

On honourable terms, or else retire,

And in himself possess his own desire;

Who comprehends his trust, and to the same

Keeps faithful with a singleness of aim;

And therefore does not stoop, nor lie in wait

For wealth, or honours, or for worldly state,

Whom they must follow; on whose head must fall,

Like showers of manna, if they come at all:

Whose power shed round him in the common strife,

Or mild concerns of ordinary life,

A constant influence, a peculiar grace;

But who, if he be called upon to face

Some awful moment to which Heaven has joined

Great issues, good or bad for human kind,

Is happy as a Lover; and attired

With sudden brightness, like a Man inspired;

And, through the heat of conflict, keeps the law

In calmness made, and sees what he foresaw:

Or if an unexpected call succeed,

Come when it will, is equal to the need:

—He who, though thus endued as with a sense

And faculty for storm and turbulence,

Is yet a Soul whose master-bias leans

To homefelt pleasures and to gentle scenes;

Sweet images! which, whereso’er he be,

Are at his heart; and such fidelity

It is his darling passion to approve;

More brave for this, that he hath much to love:—

’Tis, finally, the Man, who, lifted high,

Conspicuous object in a Nation’s eye,

Or left unthought-of in obscurity,—

Who, with a toward or untoward lot,

Prosperous or adverse, to his wish or not,

Plays, in the many games of life, that one

Where what he most doth value must be won.

Whom neither shape of danger can dismay,

Nor thought of tender happiness betray;

Who, not content that former worth stand fast,

Looks forward, persevering to the last,

From well to better, daily self-surpast:

Who, whether praise of him must walk the earth

For ever, and to noble deeds give birth,

Or he must fall to sleep without his fame,

And leave a dead unprofitable name,

Finds comfort in himself and in his cause;

And, while the mortal mist is gathering, draws

His breath in confidence of Heaven’s applause:

This is the happy Warrior; this is he

Whom every Man in arms should wish to be.

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“The Trouble Is…”: Crisis and Critics in American Higher Education

We’re no good, we’re no good!
We’re no earthly good,
Like the best of us is no damn good!
The trouble is he’s crazy.
The trouble is he drinks.
The trouble is he’s lazy.
The trouble is he stinks.
The trouble is he’s growing.
The trouble is he’s grown.
Krupke, we got troubles of our own!
Gee, Officer Krupke,
We’re down on our knees,
‘Cause no one wants a fellow with a social disease.
– “Gee, Officer Krupke,” West Side Story, Lyrics by Stephen Sondheim, music by Leonard Bernstein.

In my last post, I listed the large range of readings I’ve absorbed on the subject of the crisis in American [1] higher education. And I offered to follow up with a post of commentary on that literature. Here it is.

Opinions about the ills of American higher education are almost as diverse as the causes of juvenile delinquency in 1957, when West Side Story was first produced. The consequences of this diversity are important, as I’ll discuss in this survey. The field of criticism is simply vast; much of it is repetitive. My aim here is to highlight some prominent themes as a foundation for an informed discussion among concerned citizens. It pays to think critically about the mountain of research and opinion: along the way I will comment on the critics and their criticisms. Some overarching conclusions are that:

· There is a crisis in higher education in America. Academicians love to mince words; but whether you call it a crossroads, crunch, climacteric, critical situation, or crisis, virtually no one thinks that the present situation is acceptable or that it is likely to get better. What is at issue are the dimensions of the crisis, their materiality and priority, and who is accountable.

· No stakeholder in higher education escapes unscathed. There is plenty of blame to go around. A sophisticated reading of the field entails knowing who is bringing what interests to the debate. Many stakeholders don’t seem to recognize the plurality of claims and interests; and, many amount to single-issue advocates, which complicates the conversation.

· The criticism of higher ed varies enormously in quality. The best material is very well-researched, objective, exquisitely-written, and guides the intelligent reader to reasonable conclusions. The worst material is superficial, wreathed in betrayal and polemic in nature, like being yelled at for 200 pages. Such critics will tell you your house is on fire, but not where to point the fire hose to good effect. See the just-previous blog post for an annotated list of books and articles on which this commentary draws (references to books are given in numbers, to articles in alphabet.)

At the end of it all, most objective observers would conclude that American higher education faces a “wicked problem”: restoring the effectiveness of American higher education and putting it on a sound and sustainable path entails reaching some alignment on the causes of the crisis, who is accountable, and where are the points of greatest leverage for setting things right. Even the notion of “right” invites a debate about who should decide what is “right” and how? Given what one can read about the problem it is no wonder that boards of trustees, professors, administrators, journalists, public officials, students, parents, and other stakeholders are pulling in different directions.

Overview of the Field

Higher education in America is big business, so to speak. As of 2012, there were 4,706 colleges and universities for whom students were eligible to receive federally-funded financial aid. In 2011, these schools had 21 million students enrolled, or 5.7% of the US population. According to the National Science Foundation, total spending on tertiary education was 3.1% of the U.S. Gross Domestic Product in 2007—though not the largest industry in America, it is very influential on culture, growth, and innovation.

Higher education is highly segmented. Of the 4,706 schools, prominent rankings pay attention to about 10%. For instance, US News & World Report covers only 300 universities and 250 liberal arts colleges. An even smaller percentage of schools are deemed “research-intensive”: only 60 U.S. universities and two Canadian universities belong to the prestigious American Association of Universities, a group of leading research institutions. Smaller numbers of schools are regarded as “selective” in their admissions or have sizeable financial endowments. Other dimensions on which to subdivide the field are public/private, religious/secular, four-year/two-year, etc. This means that the reader should be wary of generalizations across the entire field. One size does not fit all.

For instance, the view of many observers is that the crisis in higher education will not substantially threaten the “elite” schools (top-ranked, best endowed, most selective, etc.) or the community colleges. Rather, it will have its greatest impact in the big middle ranks of the field. [2] I have blogged before on the problem of being “Stuck in the Middle.” But others (see [43]) predict that that regional publics, like James Madison University, are in the best position to grow and adjust to changing demographics and financial constraints.

Dimensions of the Crisis in American Higher Education

The evidence of a crisis is hard to ignore. It seems to be material, pervasive, and increasing. Observers will argue about facts, research methodologies and conclusions. Cast your eyes down the following points and decide for yourself:

· Dropout rates. Barely more than a third of students who start a degree program finish it. Ranking America concluded, “According to the OECD, the United States had a tertiary (college and university) graduation rate of 36.5% in 2007. This rate was low enough for the United States to rank fifteenth out of 30 countries in this category. Iceland ranks first with a tertiary graduation rate of 63.1%.” [3] Even for the field at large, the US lags in the ability of higher education to produce graduates at the Bachelor’s degree level.

· Vaulting cost of attendance and rising student debt. Tuition has been rising at rates well in excess of inflation for 30 years. The price of a four-year college education averages more than $100,000 and is forecasted to exceed $250,000 by 2025. The class of 2013 graduated with an average of $35,200 in debt per student—the face value of all student debt now exceeds $1 trillion. [4]

· Disappointing learning. Recent reports of research of what students actually learn in college show scant gains in writing and analytical skills. Richard Arun and Josipa Roksa [2] found that 45% of college students made no gain in writing, complex reasoning, or critical thinking during their first two years in college; by graduation, that percentage was still high: 36%. They wrote, “American higher education is characterized by limited or no learning for a large proportion of students.”

· Rising vocationalism and low employment. Increasingly, students come to colleges and universities out of a desire to get a job, rather than an education. Yet, in recent years new college graduates have not found the employment they hoped to gain. One assessment claimed that “53% of recent college grads are jobless or underemployed.” [5] High unemployment should always be a concern to civic and corporate leaders—but do current unemployment levels presage a secular worsening of employment among college graduates, or are they an artifact of the Panic of 2008 and the Great Recession?

· Declining public support and bad press. The long term trend of declining government support for higher education in America mirrors worsening public opinion: one survey interviewee said, “Higher education has been knocked off the pedestal of public opinion in recent years because of the perception that colleges are not doing enough to innovate and keep costs low for students.” [6]

· Leadership turmoil. Public friction and instability among top leadership is a classic sign of stress in an enterprise. In 2014, University of Texas—Austin witnessed a fight between the President versus the Chancellor of the UT system, and the Governor of Texas. Prominent universities including Arizona, Illinois, Massachusetts, Oregon, and Wisconsin have seen their leaders retire or resign under pressure from boards of trustees. In 2012, University of Virginia witnessed a similar resignation under pressure—and then a reinstatement. The average tenure of a college or university president fell from 8.5 years in 2006 to 7 years in 2011. [7]

· Worsening finances, bond ratings, and state support. Moody’s [Q] recently issued a report questioning the financial viability of many colleges and universities. Revenue growth for many schools is nil or negative: net tuition is expected to decline at a quarter of all schools; in 2013 net tuition was flat or declining for three quarters of public colleges and three-fifths of private colleges, and most schools feel unprepared for MOOCs and other digital technology.

· Winner-take-all economics. In a previous blog post (“Higher Education When Winners Take All”) I presented a range of data showing a highly asymmetric distribution among schools of a range of outcomes such as research grants, pricing, endowment wealth, and stature. It seems that the rich keep getting richer. Perhaps this means that the sunny results for American higher education accrue from a small number of elite universities and are not characteristic of the entire population—this has led Kevin Carey [F] and others to conclude that “Americans think we have the best colleges. We don’t.”

· Exits and disruptive entrants: Instability or displacement of many competitors is another classic indicator of turmoil. Annually, we see only a small percentage of schools closing their doors or merging with other institutions, typically for reasons of financial failure. Antioch College was one prominent example, closing in 2008 and then reopening in 2011. Incumbents may be experiencing a share-of-market displacement with new entrants in higher ed. The appearance of for-profit schools (e.g., Phoenix, Corinthian, Kaplan) and online competitors (e.g., Coursera, Udemy) challenge conventional models. Amanda Ripley wrote in Time, “Elite universities…are unlikely to go away in the near future, as even Udacity’s co-founder (and Stanford alum) David Stavens concedes. “I think the top 50 schools are probably safe,” he says. There a magic that goes on inside a university campus that, if you can afford to live inside that bubble, is wonderful.”…It seems likely that very selective—and very unselective—colleges will continue to thrive…The colleges in the middle, though—especially the for-profit ones that are expensive but not particularly prestigious—will need to work harder to justify their costs. Ideally, Udacity and other MOOC providers will help strip away all their distractions of higher education—the brand, the price and the facilities—and remind all of us that education is about learning.”([S], p. 41.) Of course, stripping away the distractions may strip away important avenues of student learning and growth, through leadership opportunities, socialization, deep engagement with faculty, and so on.

On their own, the dimensions of the crisis are serious enough. But, these dimensions have spillover effects of possibly greater concern. Given the association between education and social mobility, civic engagement, productivity, income equality, and employment, the stagnation and/or disruption of American higher education could adversely affect the fabric of American society.

The Paradox: Looks Good, Feels Bad

Can all this be true? Yes, though there are conflicting opinions on the severity of the crisis. Chait and First [I] give a rather bullish perspective on the outlook for private colleges. Cole [13] lauds the strengths of America’s research universities. Rosovsky [31] attributes the sense of crisis to exaggerated expectations, nostalgia, and difficult times. On the other hand, Selingo [T] presents some rather downbeat survey results of presidents of colleges and universities, folks who probably have a better inside view than anyone. The paradox is this: higher education in America is criticized on so many dimensions, yet it garners a very high return on investment for students (see my earlier blog post, “The ROI on One’s Own Higher Education”), students who are willing to pay high and rising prices, incredible philanthropic support, the most selective admissions, high levels of satisfaction among many alumni, and the highest rankings in the world. Former President of Harvard, Derek Bok, [7] wrote,

How can writers condemn our colleges so harshly if students, parents, and graduates value them so highly? On this point, the authors are silent. Whether they are simply unaware of student opinion or consider undergraduates incompetent to judge…they fail to explain why those attending college do not complain more loudly. Are the critics right and the students wrong? Or is it the reverse? Or are both right or both wrong? (p.7)

How you look at Bok’s paradox invites a range of remedies. Consider five possibilities:

1. Fraud. Perhaps there is a “vast conspiracy” to dupe constituents on all fronts. Conspiracy theorists might argue that the lovely outcomes would disappear were all parties to fully understand the true state of things. In the belief that sunlight is the best disinfectant, they will lobby for external reports, benchmarking, more rankings, and even government inspection and accreditation. The intensifying focus of government on the for-profit institutions seems justified in terms of billions of dollars in government-subsidized student loans and recent news reports about very low graduation rates and inflated promises. But can a focus on the not-for-profit institutions be far behind? Touted remedies: more regulatory reporting, standards, and jail for fraudsters.

2. Bad thinking. A second possibility is cognitive error on the part of various stakeholders. For instance, perhaps students are irrational in their consumption of educational services. Research has documented a host of behavioral influences on decision-making that cause consumers, investors, managers, and employees to deviate from rational decision-making. By this argument, some will suggest that government should intervene to direct students, faculty, and capital to their proper places. Touted remedies: Behavioral guidance for the decision-making of students and parents; more regulation for institutions.

3. Uncertainty: education is risky; and courses and schools are not easy substitutes for each other. To some extent constituents engage in a discovery process about their preferred habitats in the field: some students ought to study cosmology at a leading research university; other students should study cosmetology at a trade school or community college. If students and schools pair up in the wrong way, one or both will be unhappy. Not all career paths beyond school are equally remunerative. Plus, students will change their minds as they mature and learn. No school guarantees graduation or employment because these depend heavily on student effort and ability and on market conditions. Recent data on trends may be skewed by the Panic of 2008 and Great Recession. Is the recent record on employment temporary or permanent? Touted remedies: more risk-reduction and safety nets for students.

4. Complexity: colleges and universities have grown in size and in mission reach. This makes it hard to understand the institutions or to make wise decisions. Touted remedies: simplification, streamlining, cut non-core activities, fire administrators and faculty, ditch tenure, etc. The more radical critics advocate simply letting the system implode and rebuilding it anew.

5. The “Old Normal.” Since at least the 12th Century, higher education has always been this way, with some variation through time. Periodic upheavals are followed by periods of silent advancement. When hasn’t higher ed been in a crisis of some kind? The “new normal” is really the “old normal.” Remedies: let the schools figure it out; they’ll eventually adapt in appropriate ways.

There is evidence to support all of these explanations for Bok’s paradox. This guarantees a bubbling stew of controversy.

Who is accountable for this crisis?

The sense of many critics is that if we can identify the parties accountable for this crisis, the remedies should become clearer and the miscreants held accountable. The mass of writers (see the suggested readings in the previous blog post) focus especially on eleven targets. In the discussion that follows, I’ll simply cite an author’s last name and a number [X] to point the interested reader to a particular source.

1. It’s the professors’ fault. In 1988, Charles Sykes [34] sparked a firestorm of criticism of the professoriate for inattention to students, laziness, self-serving behavior, infidelity to the missions of their institutions, problems with academic tenure and the caste system of professorial ranks. Sykes marshals an abundance of foibles, facts, and outrages. But he over-reaches with a polemic style and questionable causation. Kingsley Amis [1] lampoons the agonies of a junior faculty member going through the tenure decision—in the end, “Lucky Jim” is fortunate in that he doesn’t get tenure and therefore won’t spend his career in the company of petty and vindictive colleagues. Andrew Hacker and Claudia Dreifus [20] describe a professoriate that is simply sour on the work they do: “Though often exceptionally well paid and able to exercise more control over their lives than the members of practically any other profession, college and university professors often express surprisingly low levels of job satisfaction…Whether we were in Berkeley or Boston, the talk was similar: the students are semi-literate; the school’s president is anti-intellectual; the new parking rules are inequitable; and there’s this boorish colleague who filibusters at meetings. At the end of the day, this strange little world often alienates the genuinely smart and idealistic.” Less polemic and more research-based are Richard Arum and Josipa Roksa [2] who document a decline in student learning and write that, “many students have been left academically adrift on today’s campuses. The typical student meets with faculty outside of the classroom only once per month, with 9 percent of students never meeting with faculty…their inflated ambitions and high aspirations have not institutionally been met by equivalently high academic demands from their professors, nor have many of them found a sense of academic purpose or academic commitment at contemporary colleges.” (pgs. 88-89) Arum and Roksa explain, “when faculty have high expectations and expect students to read and write reasonable amounts, students learn more. In addition, when students report that they have taken a class in which they had to read more than forty pages a week and write more than twenty pages over the course of a semester, they also report spending more time studying; more than two additional hours per week than students who do not have to meet such requirements. Thus, requiring that students attend to their class work has the potential to shape their actions in ways that are conducive to their intellectual development.” (p. 119) Teaching is not the whole focus of most professors. David Damrosch [14] focused his critique on the research mission of the faculty. He argues that professors produce a great deal of work oriented mainly toward a narrow circle of other professors. This specialization is costly, in terms of social isolation, organizational dysfunction, and alienation. It was not always thus in universities. He calls for a return to more collaborative, integrative, and interdisciplinary engagement within the scholarly community. Louis Menand [24] points to the “professionalization” of faculty, who identify more with the research mission of their discipline than with the welfare of their students. Gerald Graff [19] indicts professors for rendering their audiences “clueless” by failing to communicate well to those outside academe. Former Princeton President, Harold T. Shapiro [33], and former Harvard Dean, Harry R. Lewis [23], suggest that faculty and administrators have forgotten or been distracted from their foundational obligations to build the character of their students.

2. It’s the administrators’ fault. Financial problems and mission drift are due to “administrative aggrandizement,” according to Benjamin Ginsberg [17]. This professor at Johns Hopkins points to the rising number of administrators per student, rising costs, proliferation of bureaucracy, decline of faculty governance and autonomy, and spread of left-wing political correctness or right-wing corporatism. He notes that in 1975 there were 250,000 university administrators; by 2005, the number had grown to 750,000, eclipsing the number of tenured and tenure-track faculty. Administrators are the principal stewards of a university’s resources. Therefore the spiraling costs must point to the failure of administrative leadership—thus says Richard Vedder [39], a prominent economic critic. But William J. Baumol [3] presents a counterpoint: maybe universities suffer from a “cost disease” in which expenses perennially rise faster than inflation because of the labor intensity of their activities. Productivity improvements are difficult because schools are like string quartets: after 400 years, it still takes four performers to play a Haydn quartet. Another charge against administrators is that they focus too much on safe and sustaining investments rather than grappling with larger and riskier opportunities. Clayton Christensen coined the phrase “disruptive innovation” in which great firms decline by “aggressively investing in the products and services that the most profitable customers want” ([10] p. xxiv) and thereby fail to invest in the new disruptive products that the next generation of customers want—Christensen suggests that such products tend to be better in some respect (cheaper, simpler, smaller, more convenient) but may not be consistent with the mind-set of prevailing customers. But in industry after industry, disruptive innovations worm their way in, grow, and eventually dominate—higher ed seems ripe for disruption. On the other hand, enthusiastic application of the concept of “disruptive innovation” to a variety of fields has drawn the cogent criticism of Jill Lepore [P]. Nevertheless, transformative impact of digital communication seems likely to collide with the immutability of traditional service delivery in higher education. Clayton Christensen and Henry Eyring [11] argue a larger point, well beyond technological disruption: most colleges and universities are spending their resources inappropriately, trying to emulate Harvard and other elite research universities, in pursuit of rising prestige. They argue that the solution is to shed the superstructure of high-end research and refocus on the core teaching mission of higher education. The larger point is that administrators have succumbed to an “arm’s race” in spending, or like a game of musical chairs to see who can outlast the others, as resources become more constrained.

3. It’s the students’ fault. Tom Wolfe [42] portrays college as four years of entertainment, alcohol, and, well, fornication—students aren’t mature enough to demand anything more like an immersion in ideas, growth in critical thinking, or a transformational learning experience. In the opening pages of Wolfe’s novel, a character calls DuPont University a “MasterCard” implying a device for immediate gratification with deferred payment—this is a theme presaged by David Reisman [30] who decried rising student “consumerism.” What should students demand? Derek Bok [7] surveys the dismal record of student learning over the past few decades. And he offers a profile of a great college education: learning to communicate, learning to think, building character, preparing for citizenship, living with diversity, preparing for a global society, acquiring broader interests, and preparing for a career. Richard Arum and Josipa Roksa [2] write that the amount of time students spend in class and studying has fallen from around 40 hours per week in the 1960s to 27 hours per week recently. (pg. 3) They write, “Many students have come to believe that they ‘should enjoy their college social life since they will obtain a great job and salary after graduation.’ This stems from their expectation that they will be employed soon after graduation and that all they need to secure that employment is a college degree.” (p. 88). Perhaps the rising vocational focus of students today reflects a generational shift in culture—and it is the reaction to their environment. Perhaps this begins during the college admissions sweepstakes: Lloyd Thacker [35] writes of a “student-unfriendly marketplace” characterized by marketeering of education, rankings, “customerization” of students, radical use of financial aid to boost schools’ admissions yields, consultants, test-preps, falsification of applications, and out-of-control parents. William J. Bennett and David Wilezol [4] sustain the view that the value of getting a degree is not what it used to be and that too many people are going to universities when what they should be doing is going to vocational or technical schools.

4. It’s the fault of the alums. Graduates of a school form a powerful constituency of influence and philanthropy. They shape and amplify public opinion when the school is both doing well and when it isn’t. Rarely do they speak with one voice, for instance: young vs. old, domestic vs. international, quants vs. poets, East Coast vs. West Coast—in consequence, they can give conflicting advice to institutional leaders. And some may want to preserve the institution as they knew it at a certain moment and therefore can impede the adaptation of a school to its changing times. Just as often, they want their friends and children to enjoy access to the experience they had. As Henry Rosovsky [31] describes with candor, schools respond to alumni demands for legacy favoritism in admissions in hopes of reaping donations—a similar pressure can come from government officials toward state schools. [8] Legacy policies have drawn powerful criticism in recent years as promoting cronyism, bias, and worsening economic inequality in America. [9]

5. It’s the failure of boards of trustees and their governance. Jeffrey Selingo [32] faults the “mission creep” of many universities: Trustees succumb to the expansive ambitions of administrators and the lure of greater prestige. The failure of governance perhaps presages the replacement of entire institutions, says Harold Shapiro [33]—he asserts that the test should be the ability of an institution to “articulate and meet society’s evolving needs.” Perhaps the model of governance of universities is outdated: John Sexton, President of NYU, said, “There are 85 institutions in the world today that exist as they did 500 years ago. [These are] the English Parliament, the Papacy, eight Swiss cantons—and of the 75 remaining, 70 are universities.” [10] Henry Rosovsky wrote that decision-making is not necessarily improved by making it more democratic: “There are basic differences between the rights of citizenship in a nation and the risks that are attained by joining a voluntary organization…rights and responsibilities in universities should reflect the length of commitment to the institution…in a university, those with knowledge are entitled to a greater say…To function well, a hierarchical system of governance requires explicit mechanism of consultation and accountability.” ([31] p. 265) These are themes that University of Virginia confronted in the events of June, 2012. I have blogged about the importance of consultation and accountability (“To Fight for the Truth,” and “The Importance of Governance and Consultation”). Even Moody’s, the credit rating agency, opined that the UVA episode presages governance pressures in higher education: “For the US higher education sector overall, we expect governance and leadership clashes to increase in coming years as the sector’s ability to grow revenues dwindles, and its emphasis shifts to new operating efficiencies and cost containment. On-line learning technologies will play an increasing role in creating new efficiencies and lowering cost per student.” (Italics added.)

6. It’s the fault of corporations and vocationalism. Andrew Delbanco [15], Mark Edmundson [16] and Martha Nussbaum [27] decry the narrow vocational focus with which many students enter higher education. They argue that vocationalism stifles critical thinking, self-discovery, and curiosity-driven learning—and it prompts an intense focus on getting grades and jobs as opposed to an education. In a classic essay, Alfred North Whitehead [40] warned that an over-emphasis on technical skills crowds out and ability to lead, direct, and think broadly. The private sector has engaged with universities ever more intensively since World War II, to harvest the bonanza of inventions, to hire the talented graduates, to gain advice, and to win popular approval through philanthropy. This has the effect of influencing student career agendas, curricula, research initiatives, university strategies, faculty hiring plans, endowment investments, and the stance of objectivity and independence of the university in society. It is feared that “corporatism” could divert the university away from its core educational mission toward seeking a profit from teaching, research, and other academic pursuits. Introduction of profit-seeking into colleges and universities may create a conflict of interest: make money versus terminate that failing student, the marginal degree program, or that valued student service. As early as 1918, elements of these fears were articulated by the eminent economist, Thorstein Veblen [38]. Derek Bok [9] writes, “If there is an intellectual confusion in the academy that encourages commercialization, it is a confusion over means rather than ends. To keep profit-seeking within reasonable bounds, a university must have a clear sense of the values needed to pursue its goals with a high degree of quality and integrity.” (p.6) One could add that government can have a similar influence on the objectivity and independence of universities through the disposition of largess in support of research, diversity, or various other social ends.

7. It’s the fault of big-time athletics. Division I schools allocate a substantial stream of resources toward athletics, and supposedly away from academics. At these schools, football and basketball coaches can earn in excess of $1 million per year, dwarfing the compensation of virtually everyone else on campus. [11] The investment in plant and equipment is considerable. In return, the schools look to receive broadcast revenues. But as Derek Bok writes [9], “the mounting costs of maintaining a competitive athletic program have made it difficult for universities to achieve real financial success from major sports. Although many Division I schools claim to make money on their football and basketball programs, many do not, especially if the capital costs of their facilities are accurately counted.” (p.38) And again, “There is no reliable evidence that successful athletic teams raise state appropriations or alumni giving to any appreciable extent.” (p. 50) A recent study by Moody’s [R] reported that 90% of athletic programs at universities require subsidies. And periodic athletic scandals remind one of how distorting a powerful athletic program can be. Paul Barrett [B] reported, that at UNC “the university’s own internal reviews and investigations—limited though they’ve been—have shown that since the 1990s, football and basketball players have been steered into fake “paper classes” that didn’t meet. Grades were routinely altered without authorization, and faculty signatures were forged.” Novelist Tom Wolfe [42] argues that university athletes are ‘hired’ for the sports business and are not students in a conventional sense. Leon Botstein [D] calls universities a “farm team for professional sports.”

8. It’s the fault of government. Gene Block [C], Chancellor of UCLA, noted that per-student government funding at UCLA fell 60% between 1992 and 2012. The only alternative to tuition increases would have been cutbacks in classes, which would have adversely affected access and graduation rates. Declining government support for higher education has shifted the burden of education from taxpayers to students. Subsequently, Federal government loans to students vaulted to more than $1 trillion. Recently, some regulators proposed rubrics for rating colleges and universities as a condition for eligibility for student loans—here, the criticisms of Diane Ravitch [29] about standards of evaluation for K-12 schools may become relevant to higher education: such rubrics imperfectly measure learning; and can warp the incentives for teachers and administrators.

9. It’s the fault (or promise) of technologists and/or their technology. The incredible rise of information technology in the past three decades is associated with dramatic strains in American society. Claudia Goldin and Lawrence Katz [18] studied the stagnating growth rate in American productivity and conclude that it is due in part to “skills-based technological change.” The American workforce has not adjusted rapidly enough to changing technology, thus sidelining parts of the workforce in terms of employment, income, and mobility. This is a message amplified by Erik Brynjolfsson and Andrew McAfee [10] and Jaron Lanier [22]: new technology threatens to hollow out the middle class. Have educational institutions kept pace with the vaulting advancements in information technology? Probably not. Techno-optimists have turned to higher education with the enthusiasm they brought to K-12 education. A few years ago, Clayton Christensen [12] turned his attention to disruptive innovation in K-12 education in the U.S. He advocates a turn to “student-centric” educational methods that rely on computer-based learning and the “flipped classroom” in which standardized teaching is abandoned in favor of a more tailored, tutorial approach. But Sherry Turkle [37] raises a concern relevant to higher education: what if something important, such as deep conversation, is lost in the digitization of human interaction? Last winter, the Chronicle of Higher Education reported, “MOOCs made no significant inroads in the past year in the existing credentialing system in higher education, calling into question whether they will be as disruptive to the status quo as some observers first thought Still, academic leaders remain worried that “credentials for MOOC completion will cause confusion about higher education degrees.” [12] Critics also fear the disruption in potential layoffs and school closings as curricula get digitized; even among elite universities there resides a fear that multi-device delivery of instruction will displace the person-to-person learning experience that has been the hallmark of university education for centuries. In previous posts, I have explored the potential and criticisms of digital technology in higher education (“Yes We Have No Nirvanas: The Arms Race in Online Ed,” “New Technology, B-Schools, and Darwin” and “The Frontier of Technology and the Educational Experience”). I prefer to think that technology can augment the learning experience if used wisely, but that it is yet very early in the regime shift that technology will cause and therefore is too early to tell whether our hopes or fears are justified.

10. It’s the fault of foreigners. It is suggested that globalization is altering the ability of higher education to fulfill its mission. The cross-border mobility of students, faculty, and staff has grown markedly over the past decades. Bruner [9] and Wildavsky [41] document rising mobility, globalization of American schools, and emergence of strong foreign schools contenting for top global rankings. And the traffic goes both ways: NYU has opened a campus in Abu Dhabi; Yale has founded a sibling school in Singapore. Globalization requires financial capital, and more importantly, greater attention from faculty and administrators—perhaps globalization is diverting resources from the core. Perhaps it indicates mission creep. In the view of some, this has put pressure on access to American colleges and universities—in a recent article, David Leonhardt [N] suggested that access to American schools has grown harder because “colleges are more globalized.” In my own blog post on the subject (see “The Case for International Students) I look at the facts and conclude that globalization is a net benefit to higher education and American society.

11. It’s the fault of the elites. The leitmotif of the preceding ten points is distrust in leaders. Are the elites really worth it? No doubt about it: for the past 15 years, America has been a simmering stew of populist reaction against executives, elected officials, the cognoscenti, and/or the wealthy. Think of the Tea Party and Occupy Wall Street. Or think of the anger at the response to Hurricane Katrina, Iraq/WMD, the Panic of 2008, or the roll-out of the Affordable Care Act. At record lows recently are confidence in President Obama (24%) and the U.S. Congress (14%). And the pay of academic leaders is a perennial piñata. But the market for talent in academia is pretty competitive; and faculty and staff members tend to sort themselves into different institutions by many attributes including talent, inclination, a sense of “calling,” and work ethic. Pay in academia is highly segmented by areas of expertise, experience, merit, and type of school. It’s not a perfect market, but generally, schools get the talent that they are willing to pay for. And one size does not fit all. If you want a top research university, you’ll have to pay the price. Academia survives on transparency and debate and therefore is an easy target for the populists’ anger. My take on all of this is that academic leaders should do a better job of building trust in themselves and their institutions.

Gee, Officer Krupke

The juvenile delinquents’ song in West Side Story isn’t really a plea for help from Officer Krupke; it’s an ironic satire about their critics. Each critic says what’s wrong, and then places the boys in someone else’s lap. The kids are just getting passed around by advocates of different remedies. Yet the problem continues. Reading the critics of American higher education prompts a similar sentiment.

The crisis in American higher education classifies as a “wicked problem,” which Wikipedia says is, “a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize. The term, “wicked,” is used to denote resistance to resolution, rather than evil. Moreover, because of complex interdependencies, the effort to solve one aspect of a wicked problem may reveal or create other problems.”

The prominent weakness of the critics is their failure to address the “wickedness” of the crisis: the incomplete and contradictory facts, the interdependence of effects and the strong resistance to obvious remedies. As H. L. Mencken wrote, “For every complex problem there is an answer that is clear, simple, and wrong.” To assert that everything will be fine if we just fire some administrators or eliminate tenure or invest in technology or cut research funding is simply boneheaded. We have to tackle the interdependencies within the wicked problem in a coordinated manner. This requires alignment among stakeholders. As in West Side Story, so it is among the critics of higher education: there is little alignment.

Not long ago, a colleague from another department came to see me about all of this. In the course of the conversation, he asked, “How much worse could it get?” The proper answer is, “plenty.” But the path is highly uncertain. An analysis of companies and industries that have endured a regime shift shows wide variance in outcomes—perhaps their examples can offer some insights about the way ahead. On that theme I hope to give some additional comments in the future.

  1. In this discussion, I focus mainly on America for the sake of focus and brevity. []
  2. See “Trouble in the Middle,” Economist, November 2011, []
  3. []
  4. Data drawn from Matthews, “Tuition is Too Damn High” Washington Post, September 3, 2013. []
  5. The Atlantic, April 23, 2012 []
  6. See “Public Opinion of Higher Education Continues Downward Slide” []
  7. Association of Governing Boards of Universities and Colleges, 2012. []
  8. For instance, see, “Texas Admissions Brawl,” Wall Street Journal, July 10, 2014. []
  9. See, for instance, “Should Colleges Consider Legacies in the Admissions Process?” Wall Street Journal, July 9, 2012. []
  10. Joel Trachtenberg, [36] pages 3-4. []
  11. See “Is Your State’s Highest-Paid Employee a Coach? (Probably)” in Wall Street Journal. []
  12. “Doubts About MOOCs Continue to Rise, Survey Finds,” Chronicle of Higher Education, January 24, 2014, pg A17. []

Suggested Readings about the Crisis in American Higher Education

Each fall, I offer diligent readers of this blog some tips to the best books that I’ve read over the past year. My regular review is coming next month. But herewith you get an early bonus: a list of suggested readings that will help you to grasp the breadth of controversy and criticism around American higher education. For the past several years, I’ve pursued a private inquiry into the crisis in higher ed because as an academic leader I’ve seen aspects of the crisis and wanted to make sense of what was going on. Anyone who cares about higher ed should invest time and attention accordingly.

The following 43 books and 21 articles are the unadulterated list of my readings to date, the “full monty,” so to speak. I can’t say that I like or endorse all of these items. But just as you can’t really understand capitalism without knowing its critics, I suggest that you can’t understand what is going on in higher ed without reading across some of the good, bad, and ugly. For many of these items, I offer some highlights and/or memorable quotes to help you anticipate what is inside. Because some of my notes cross-reference other items on the list, I give each book a numbered reference and each article an alphabetical reference. In a future post, I’ll follow up with a synthesis or summary of takeaways from these readings.  In a future post, I’ll follow up with a synthesis or summary of takeaways from these readings.

Meanwhile, I encourage you to embark on your own reading program on higher education.

1. Amis, Kingsley, Lucky Jim, New York: Penguin, 1954. A classic satire about faculty politics and the flaws of academic tenure. Memorable quote: “there were compensations for ceasing to be a lecturer, especially that of ceasing to lecture.” (pg. 233)

2. Arum, Richard, and Josipa Roksa, Academically Adrift: Limited Learning on College Campuses, Chicago: University of Chicago Press, 2011. The authors present a good summary of evidence for underperformance of American higher education, as indicated by measures such as graduation rates and learning. The focus of the authors’ original research is changes in academic engagement between students and faculty, and in instructional climates–think of metrics such as numbers of meetings of a student with a professor or of the number of hours studying per week or the number of pages of required writing or reading per course. Memorable quote: “when faculty have high expectations and expect students to read and write reasonable amounts, students learn more. In addition, when students report that they have taken a class in which they had to read more than 40 pages a week and write more than twenty pages over the course of a semester, they also report spending more time studying: more than two additional hours per week than students who do not have to meet such requirements. Thus, requiring that students attend to their class work has the potential to shape their actions in ways that are conducive to their intellectual development.” (p. 119) Alexander Astin [A] criticized the study’s statistical techniques and measurement instrument—similar claims could be applied to a broad cross-section of research in the social sciences. It is possible that learning gains are better than Arum and Roksa reported. Even so, the book remains important as an example of statistically-driven criticism of higher education that prompts vigorous and learned debate.

3. Baumol, William J., The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t, New Haven: Yale University Press, 2012. This book presents an interesting counterpoint to the assertion that costs in higher education are out of control. Baumol writes, “The cost disease asserts that the costs of health care, education, the live performing arts, and a number of other economic activities known as the “personal services,” are condemned to rise at a rate significantly greater than the economy’s rate of inflation, as indeed they have…This is so because the quantity of labor required to produce these services is difficult to reduce.” (p. xvii) To present a Haydn quartet still requires four accomplished musicians. Memorable quote: “Not the least of the problems we face is the difficult task of helping the public recognize the difference between the reality and the illusion of the cost disease. For instance, it surely will be difficult to convince intelligent nonspecialists that although costs of personal services appear to be out of control, they are actually falling in terms of the labor-time required to earn enough to pay for them.” (p. 63)

4. Bennett, William J. and David Wilezol, Is College worth It? Nashville: Nelson, 2013. The average results of high ROI from a college education mask the fact that the returns are asymmetrically distributed: students who attend elite schools really do benefit from a college education; for the rest, the returns are much lower. Taking the premise of asymmetry, the memorable message of this book is: “Two-thirds of the people who go to four-year colleges right out of high school should do something else.” (p. vii)

5. Bloom, Alan, The Closing of the American Mind: How Higher Education has Failed Democracy and Impoverished the Souls of Today’s Students, New York: Simon and Schuster, 1987. The 1960s and 1970s saw a shift in thinking about college curricula and the general learning experience of higher education. Bloom’s book surveys and strongly criticizes this shift and had a strong impact on criticisms of higher ed in the ensuing decades.

6. Bok, Derek, Our Underachieving Colleges: A Candid Look at How Much Students Learn and Why They Should Be Learning More, Princeton: Princeton University Press, 2006. This is one of the best comprehensive summaries of what ails higher education. Well written, objective, well-documented, empathetic toward higher ed, and yet insistent on a higher standard. Memorable quote: “The good news is that most of the serious deficiencies can be overcome, at least to a significant degree given the will to do so. The bad news is that most of the problems are not being seriously addressed on campuses today, nor will they be until they are correctly identified and clearly understood by those responsible for the quality of teaching and learning in our colleges.” (p.10)

7. Bok, Derek, Universities and the Future of America, Durham: Duke University Press, 1990. Bok considers what universities and the application of science can do to enhance productivity in the economy.

8. Bok, Derek, Universities in the Marketplace: The Commercialization of Higher Education, Princeton: Princeton University Press, 2003. Bok addresses “efforts within universities to make a profit from teaching, research, and other campus activities.” Is this necessarily bad? The numerous examples that Bok presents suggest ways in which academia and business collaborate to produce gains for society. But the costs and impact of those efforts are at issue. This is a very well-written and objective assessment of the pros and cons of commercialization. Favorite quote: “Universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires.” (p.9)

9. Bruner, Robert (ed.) Globalization of Management Education: Changing International Structures, Adaptive Strategies, and the Impact on Institutions. Tampa: AACSB, 2011. This study combines field interviews and large-sample surveys to document the extent and trends of cross-border engagement in management education.

10. Brynjolfsson, Erik, and Andrew McAfee, The Second Machine Age: Work, Progress, and Prosperity in a time of Brilliant Technologies, New York: Norton, 2014. Memorable quote: “Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead. As we’ll demonstrate, there’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.” (p. 11)

11. Christensen, Clayton M., and Henry J. Eyring, The Innovative University: Changing the DNA of Higher Education from the Inside Out, New York: Jossey-Bass, 2011. This book extends Clayton Christensen’s theory of “disruptive innovation” to higher education. They argue that professors and administrators do not see what is about to hit them in the form of new technology, leaner for-profit schools, demographic change, and changing needs of society. The result is that the dominant model of higher education (the research university epitomized by Harvard) is unsustainable for most universities, who will be displaced by very lean schools (such as BYU-Idaho). Memorable quote: “The burning question highlighted by 2008’s downturn is not whether the great research universities, such as Berkeley and UCLA, and Harvard, are cost-justified, but whether the less powerful ones, which comprise the vast majority, can continue as they have in the past. The schools most at risk are the more than 700 public and not-for-profit universities that grant graduate degrees but are not among the 200 elite research institutions.” (p. 195) The concept of “disruptive innovation” offers valuable insights, yet it has metastasized in popular usage—I recommend reading this book along with a critical review by Jill Lepore [P].

12. Christensen, Clayton M., Michael B. Horn, and Curtis W. Johnson, Disrupting Class: How disruptive Innovation Will Change the Way the World Learns, New York: McGraw-Hill 2008. This book applies Christensen’s theory of disruptive innovation to K-12 education in America. The authors argue that standardization conflicts with the need for customization of the learning experience for students. Technology can help to resolve the conflict: “flip” the classroom so that common material (lectures, examples, didactic material) can be delivered by tablet each evening, and the classroom time can be devoted to working through problems and examples in the presence of the teacher. Memorable quote: “What our studies of innovation show, however, is that a specific type of innovation, which we call disruption, almost always trips up well-managed improving companies. Disruption is difficult because the definitions and trajectories of improvement change. What were valuable improvements before the disruption now are less relevant. And dimensions of the product that had been important become highly valued.” (p. 44)

13. Cole, Jonathan R., The Great American University: Its Rise to Preeminence; Its Indispensable National Role; Why It Must Be Protected, New York: Public Affairs 2009. Very well written, though self-congratulatory and even nationalistic at times. One of the best rebuttals to critics of American higher education: deeply grounded in the history of universities; extensively documented; highlights major contributions to society; a spirited defense of academic freedom. I recommend it highly as it contains many valuable insights. Resonant quote, “We must fortify and protect our great universities, or, to paraphrase Winston Churchill in another context, we are apt to crumble from within before we crumble from without.” (p. 469).

14. Damrosch, David, We Scholars: Changing the Culture of the University, Cambridge: Harvard University Press, 1995. Wonderfully argued down to an obvious point: universities would benefit from more, rather than less, collaboration. The absence of collaboration is due to the gradual build-up of specialization, arcane research methodologies, and scholarly alienation. Favorite quote: “scholars should be able to do better at working together and at listening to one another.” (p. 186)

15. Delbanco, Andrew, College: What it Was, Is, and Should Be, Princeton: Princeton University Press, 2012. Delbanco decries the vocationalism with which many students come to the college experience. He presents an alternative vision of college as an intense episode of discovery of ideas and ways of thinking. And he argues that access to the true college experience is dwindling rapidly.

16. Edmundson, Mark, Why Teach? In Defense of a Real Education New York: Bloomsbury, 2013. An essay on learning in college (not so much about teaching) by a colleague at University of Virginia. He argues that too much of college education is about preparing people to “slide into a social machine and function smoothly with a little application from time to time of the right pleasing grease. Education now prepares us for a life of conformity and workplace tedium…But what we want is real learning–learning that will help us see the world anew and show us that there could be more to our lives than we had thought.” (p xii). His chapter, “A Word to the Incoming Class,” is inspiring and worth the price of the book. So is the chapter, “Glorious Failure,” his convocation address in 2005. Memorable quotes: “The proper business of teaching is change–for the teacher (who is herself a work in progress) and (preeminently) for the student.” (p. 165) And “I’d like us to blow a hole through the university’s ethos of entertainment and training for success and to bury its wearisome work-hard, play-hard frat-boy ideology. We should blast away the customer coddling deans and student service hacks; blast past academic pretension and the hunger for “standing in the field.” Blast university presidents so afraid of offending a potential donor that they won’t raise a word in behalf of social justice or political sanity. Blow away the trustees who think that they’re a corporate board of directors and will not rest until their schools resemble Walmarts. Blast them all. And while you’re doing it, have a good time. Because knowledge is joy. Creativity is ultimate freedom. Real thought is bliss. Sapere Aude, as the old thinker liked to say: Dare to Know; Dare to be Wise.” (p. xiv) Edmundson’s violent imagery (“blast” and “blow away”) suggests the passions that some professors display toward student culture and university leaders.

17. Ginsberg, Benjamin, The Fall of the Faculty: the rise of the All-Administrative University and Why It Matters, Oxford: Oxford University Press, 2011. A polemic against the rise of staff and administration in higher education. Well-documented but suffers a bit from its sarcasm and over-blown style. Memorable quote: “It is because it is such a unique institution that it is so important to save the university from its deanlets. But the rescue mission is belated and not certain to succeed. The blight of the all-administrative university is spreading from campus to campus, from the community colleges to the private research universities, as deanlets copy one another’s best practices, expand their already bloated administrative ranks, and use financial crises to further erode the autonomy of the faculty.”

18. Goldin, Claudia, and Lawrence F. Katz, The Race Between Education and Technology, Cambridge: Harvard University Press, 2008. This book presents an excellent survey of the history and current status of the relationship between economic growth and education. Is the relationship across countries and time between income per capita and education truly causal or merely coincidental? This question is motivated by the observation that growth in educational attainment in America stagnated in the last quarter of the 20th Century–could that be a cause of stagnating economic growth? The authors find a significant association between education and growth in productivity and that the association weakened in the late 20th Century. This weakening is due in part to “skill-biased technological change” and to the changing demand for skills in the economy. Richly documented with original research. Though aimed mainly at K-12 education, the research presented here has important implications for higher education. Memorable quote: “Throughout this volume we have emphasized the existence of an ongoing and relentless race between technology and education. Economic growth and inequality are the outcomes of the contest. As technological change races forward, demands for skills–some new and some old–are altered. If the workforce can rapidly make the adjustment, then economic growth is enhanced without greatly exacerbating inequality of economic outcomes. If, on the other hand, the skills that are currently demanded are produced slowly and if the workforce is less flexible in its skill set, then growth is slowed and inequality widens. Those who can make the adjustments as well as those who gain the new skills are rewarded. Others are left behind.” (p. 352)

19. Graff, Gerald, Clueless in Academe: How Schooling Obscures the Life of the Mind, New Haven: Yale University Press, 2003. Very well-written discussion of what should be the aims and activities of a college education. The final chapter, “How to Write An Argument: What Students and Teachers Really Need to Know,” is outstanding. The author’s thesis is that academicians don’t explain themselves very well: academia is different from the rest of society, but for good reasons. Memorable quote: “academia reinforces cluelessnesss by making its ideas, problems, and ways of thinking look more opaque, narrowly specialized, and beyond normal learning capacities than they are nor need to be. As I see it, my academic intellectual culture is not at all irrelevant to my students’ needs and interests, but we do a very good job of making it appear as if it is.” (pg. 1)

20. Hacker, Andrew and Claudia Dreifus, Higher Education? How Colleges are Wasting our Money and Failing Our Kids–And what We Can Do About It, New York: Henry Holt, 2010. These authors criticize universities for their rising cost, falling impact, vocationalism, devotion to sports and entertainment, etc.–in all this book is a comprehensive survey, reasonably documented, of the ailments of higher ed. The central thesis: schools have lost their way because of inattention to their core mission. The authors provide a longish list of remedies. Memorable quote: “higher education should be open to every young person, and this is an option we can well afford. We confess to being born-again Jeffersonians: we believe everyone has a mind, the capacity to use it, and is entitled to encouragement. Of course, students have to do their share. But the adults who have chosen higher education as their profession have even greater obligations, which we’re not convinced they’re fulfilling.” (p.3)

21. Kerr, Clark, The Uses of the University, Cambridge: Harvard University Press, 1963. Kerr was an iconic proponent of the enlargement of the “multiversity.” And yet, this former Chancellor of the University of California describes academia as especially hidebound: “Few institutions are so conservative as the universities about their own affairs while their members are so liberal about the affairs of others.” (p.99)

22. Lanier, Jared, Who Owns the Future? New York: Simon & Schuster, 2013. Lanier is an extremely thoughtful critic of Web 2.0 and its claims on users. He argues that technology is eliminating the middle class and that academic tenure helps to preserve that middle class.

23. Lewis, Harry R., Excellence Without a Soul: Does Liberal Education Have a Future?, New York: PublicAffairs, 2006. Written by a longstanding faculty member and Dean at Harvard, this book challenges higher education to consider a larger mission, not only to increase knowledge, but to grow wisdom. Lewis sustains the view that teaching is a moral act, which higher education forgot as it evolved. Memorable quote: “over the decades, I have heard many academic discussions about teaching, about the curriculum, about grading, about athletics, and about responding to student misdeeds. I have almost never heard discussions among professors about making students better people. Professors are warned to look for signs of emotional distress in students and to steer them to mental health services. But what most students needs more than psychiatric referrals is help shaping the lives that they themselves, and not their parents, will lead. Presidents, deans, and professors rarely tell students simple truths, for example that the strategizing and diligence that got them into the college of their choice may not, if followed thoughtlessly, lead to an adult life they will find worth living.” (p. xv)

24. Menand, Louis, The Marketplace of Ideas: Reform and Resistance in the American University, New York: Norton, 2010. This is an outstanding essay on the “professionalization” of academia: the solidification and subdivision of disciplines and fields; the monopolization of the production of knowledge and even the producers of that knowledge; the surge in government grants after WWII that supported this trend. Menand writes that “Academic inquiry, at least in some fields, may need to become less exclusionary and more holistic.” Fundamentally, this book is about the difficulty with which academia embraces interdisciplinary work–a highly relevant issue to the unfolding debates about the ability of higher education to deliver relevant learning. Memorable quote: after a transformational change in the 1970s, “was clearly a reaction against the model created by the Golden Age and the academic revolution: the model of disinterested research and the great books, or “Western Civ” curriculum. The vocabulary of “disinterestedness,” “objectivity,”‘ “reason,” and “knowledge,” and talk about things like “the scientific method,” “the canon,” and “the fact/value distinction” began to be superseded, particularly in the humanities by attention to “interpretations” (rather than “facts”), “perspective” (rather than “objectivity”), and “understanding” (rather than “reason” or “analysis”). An emphasis on universalism or “greatness” was replaced by an emphasis on diversity and difference; the scientistic norms that once prevailed in many of the “soft” disciplines began to be viewed with skepticism (though a very rigorous skepticism); context and contingency were continually appealed to; attention to “objectives” gave way to attention to “representations. ” (pgs. 80-81)

25. Mettler, Suzanne, Degrees of Inequality: How the Politics of Higher Education Sabotaged the American Dream, New York: Basic Books, 2014. The book argues that political partisanship is killing the historical American value of access to higher education, and the attendant promise of economic mobility and the American Dream. Congress is the villain in her view.

26. Newman, John Henry, The Idea of a University Defined and Illustrated. Edited by I.T. Ker. Oxford: Clarendon, 1976. One of the classic expressions of what a liberal education should be.

27. Nussbaum, Martha, Not for Profit: Why Democracy Needs the Humanities, Princeton: Princeton University Press, 2012. This book is a defense of the liberal arts in an age of rising vocationalism among students.

28. Pelikan, Jaroslav, The Idea of the University: A Reexamination. New Haven: Yale University press, 1992. A rejoinder to John Henry Newman’s book, Pelikan reviews the concept of the university in light of its new context in the late 20th Century.

29. Ravitch, Diane, the Death and Life of the Great American School System: How Testing and Choice Are Undermining Education, New York: Basic Books, 2010. This is a provocative and penetrating critique of government policy as it relates to K-12 education in America. It is especially relevant to higher education as part of the broader debate about education in America around standards of learning and accountability for results–my hunch is that this debate is headed toward higher ed, if not already there. Memorable quote: “the next wave of school reform is bearing down on us. It will be packaged as the sine qua non of the twenty-first century: online learning…But for most purposes, students need teachers as well as one another. Students require a wise and experienced person who offers encouragement, who presents the subject in a compelling matter, who sets standards of personal conduct, who monitors more than a blinking screen. Minds develop in response to the social interaction of a lively classroom, where learners debate, discuss, and exchange ideas. Some things are best done alone, such as reading, writing, practicing an instrument, and reflecting. Others are best done in groups, such as singing in a chorus, performing in an orchestra, acting in a play, playing team sports, discussing a novel, or debating a historical controversy.” (p. 283)

30. Reisman, David, On Higher Education: The Academic Enterprise in an Era of Rising Student Consumerism, San Francisco: Jossey-Bass, 1980. This book, as the title implies, is a collection of thoughts on the rise of student consumerism post-World War II.

31. Rosovsky, Henry, The University: An Owner’s Manual, New York: Norton, 1990. A classic summary of the view of a powerful insider, a Dean. Must-read for any deanly aspirants. Rosovsky’s view is that excellence is obtained through good governance. The memorable quotes are from Rosovsky’s principles: “Not everything is improved by making it more democratic…There are basic differences between the rights of citizenship in a nation and the risks that are attained by joining a voluntary organization…rights and responsibilities in universities should reflect the length of commitment to the institution…In a university, those with knowledge are entitled to a greater say…In universities, the quality of decisions is improved by consciously preventing conflict of interest…University governance should improve the capacity for teaching and research…To function well, a hierarchical system of governance requires explicit mechanism of consultation and accountability.” (pgs. 262-277)

32. Selingo, Jeffrey, College (Un)Bound: The future of Higher Education and What it Means for Students, Boston: Houghton Mifflin, 2013. Written for an audience of parents and (prospective) students, this book gives an excellent overview of the crisis in American higher education and its sources–and how a prospective student should be a wise consumer. Memorable quote: “Higher education also suffers from mission creep. Every college has a mission about the students it aims to enroll and the public it wants to serve. But too many colleges, unhappy with their mission, aspire to move higher in the pecking order. Prestige in higher education is like profit to corporations.” (p. 12)

33. Shapiro, Harold T., A Larger Sense of Purpose: Higher Education and Society, Princeton: Princeton University Press, 2005. This former President of Princeton and University of Michigan addresses ethical dilemmas arising from the engagement of universities with society (especially corporate partnerships and sports). Memorable quote: “For the foreseeable future, existing colleges and universities will be faced with the challenge of sustaining society’s most important values, demonstrating sufficient adaptability to fill new and/or modified roles, and exerting sufficient leadership to help society shape new cultural commitments and expand others. Although this portfolio of responsibilities represents a significant challenge for faculty, administrators, and trustees, a great deal is at stake, namely, the continued social relevance of institutions of higher education. If such leadership should falter, it would not be the first time that a significant social institution was replaced, in whole or in part, by other institutions better able to articulate and meet society’s evolving needs.” (p. 11)

34. Sykes, Charles J., ProfScam: Professors and the Demise of Higher Education, Washington D.C.: Regnery Gateway, 1988. A polemic that marshals an array of research and anecdotes to motivate an agenda. Unobjective and uncritical assessment of the sources cited. Nor does it seek to explore why higher education has evolved the way it has. But this is one of the most highly-cited books by critics of higher education. The author advocates the elimination of tenure, suspension of the research mission, mandating a full(er) teaching load, open disclosure of workloads, and reimposition of the Western Canon of ideas. This, from page 4, summarizes the other 292: ” The story of the collapse of American Higher Education is the story of the rise of the professoriate. No understanding of the academic disease is possible without an understanding of the Academic Man, this strange mutation of the 20th-century academia who has the pretensions of an ecclesiastic, the artfulness of a witch doctor, and the soul of a bureaucrat.”

35. Thacker, Lloyd, College Unranked: Ending the College Admissions Frenzy, Cambridge: Harvard University press, 2004. This is a collection of essays by college admissions directors on the subject of the “admissions crisis”: the rapid commercialization of the admissions process; the influence of rankings; surge in admissions-related spending by institutions; marketing and branding; etc. A sobering representation of a prisoner’s dilemma in higher education: everyone must spend more and compete harder; no one is better off. A quote: “the new obsession with numbers is counter-educational; that it makes for a less educated and less educable kind of student; a less thoughtful, more cynical, more boring, and more exhausted kind of student, not at all the kind of student that colleges on a clear day know they want and need.” (p. 62)

36. Trachtenberg, Stephen Joel, Big Man on Campus: A University President Speaks out on Higher Education, New York: Simon and Schuster, 2008. A memoir of service as President of a major university: candid, amusing, and sobering–must-read for Presidential aspirants. This book serves as a healthy counterpoint to critics who charge senior administrators with the decline of higher education. Trachtenberg’s view is that oversight of a major university is complex, demanding, and challenging work. Memorable quote: “I often think that presidents of universities are a lot like the untouchables in India. The role of the untouchables is to do the work that must be done but nobody wants to do. Burying the dead and collecting trash are two examples. But because they take on dirty jobs, the untouchables are themselves considered dirty. There are things that have to be done for the benefit of universities, people that have to be seen, and issues that have to be addressed that have nothing to do with you yourself but rather with the office.” (pg. 151)

37. Turkle, Sherry, Alone Together: Why We Expect More from Technology and Less from Each Other, New York: Basic Books, 2011. A provocative exploration of how our devices and computer-mediated communication change social interaction–possibly for the worse. Instructors today will see evidence of these changes in their classrooms and hallways. Turkle writes, “As we instant-message, e-mail, text, and Twitter, technology redraws the boundaries between intimacy and solitude…Tethered to technology, we are shaken when the world “unplugged” does not signify, does not satisfy…Does virtual intimacy degrade our experience of the other kind and, indeed, of all encounters, of any kind?” (pgs. 11-12)

38. Veblen, Thorstein, The Higher Learning in America: A Memorandum on the Conduct of Universities by Businessmen, New York: B.W. Heubsch, 1918. Perhaps the earliest expression of opposition to “corporatism” by universities.

39. Vedder, Richard, Going Broke by Degree: Why College Costs Too Much, Washington D.C.: American Enterprise Institute, 2004. This book is a sharp critique of the efficiency of American higher education, supported by careful research and an economist’s rigor. Vedder is quoted frequently in the media. He opposes government support for universities and recommends increasing the student-faculty ratio; ending tenure; increasing the use of part-time or adjunct faculty; and using capital-intensive instructional techniques (such as information technology). Memorable quote: “Why are universities inefficient and costly?…universities operate in a radically different environment than most business enterprises…there are four major reasons for rising costs: third-party providers, the lack of market discipline, ineffective price competition, and government regulation.” (p. 24)

40. Whitehead, Alfred North, “Universities and Their Function,” Chapter 7 in the Aims of Education and Other Essays, New York: Free Press, 1927. This presents a range of insights that have influenced the development of universities for decades since and is an influential essay on the tension between education for mastery versus education to promote imagination, creativity, and innovation. Memorable quote: “necessary technical excellence can only be acquired by a training which is apt to damage those energies of mind which should direct the technical skill. This is the key fact in education and the reason for most of its difficulties.” (p. 96)

41. Wildavsky, Ben, The Great Brain Race: How Global Universities are Shaping the World, Princeton: Princeton University Press, 2010. The author documents significant trends in the founding of schools globally, the mobility of students, and the rise of “free trade in minds.” Memorable quote: “The globalization of higher education should be embraced, not feared. The worldwide competition for human talent, the race to produce innovative research, the push to extend university campuses to multiple countries, and the rush to produce knowledgeable and creative graduates who can strengthen increasingly knowledge-based economies–all of these trends are hugely beneficial to the entire world. Increasing knowledge is not a zero-sum game.” (p.7)

42. Wolfe, Tom, I Am Charlotte Simmons, New York: Farrar, Straus, Giroux, 2004. A blistering satire about undergraduate life. Both compelling and dispiriting to an educator. Early on, a statement by one of the students sets the tone for the whole spectacle: referring to his fraternity and University he says “it’s a MasterCard…for doing whatever you want…whatever you want.” Pivotal quote: “Charlotte looked at him in a teacherly fashion. “You know what ‘liberal arts’ means?” Pause. Rumination “…No.” “It’s from Latin?” Charlotte was the very picture of patience. “In Latin liber means free? It also means book, but that’s just a coincidence, I think. Anyway, the Romans had slaves from all over the world, and some of the slaves were very bright, like the Greeks. The Romans would let the slaves get educated in all sorts of practical subjects, like math, like engineering so they could build things, like music so they could be entertainers? But only Roman citizens, the free people?–Liber?–could take things like rhetoric and literature and history and theology and philosophy? Because they were the arts of persuasion–and they didn’t want the slaves to learn how to present arguments that might inspire them to unite and rise up or something? So the ‘Liberal’ arts are the arts of persuasion and they didn’t want anybody but free citizens knowing how to persuade people.” Jojo looked at her with arched eyebrows and a compressed smile, a smile of resignation and began nodding, nodding nodding nodding. Dawn was breaking inside that big head of his. “So that’s what we are…athletes–we’re like slaves. They don’t even want us to think. All that thinking might distract us from what we were hired for.” (p. 195-6)

43. Zumeta, William, David Breneman, Patrick Callan, Joni Finney, Financing American Higher Education in the Era of Globalization, Cambridge: Harvard Education Press, 2012. This book considers the financing of American higher education drawing on a perspective of the numerous forces of change bearing on the field.


A. Astin, Alexander, “In ‘Academically Adrift,’ Data Don’t Back Up Sweeping Claim” Chronicle of Higher Education, February 14, 2011.”

B. Barrett, Paul M., “Four Blunt Points About UNC, College Sports, and Academic Corruption,” Bloomberg BusinessWeek, January 20, 2014.

C. Block, Gene D., “Keep public Universities Public,” Time, October 29, 2012, page 44. Memorable quote, “Twenty years ago, tuition at UCLA was $1,624 (or $2,564 in today’s dollars). This year tuition is $12,192. Why has the cost gone up so much? Because…California has slashed per-student spending 60%. Other states have made similar cuts. We’ve cut spending, but beyond that, the only alternative to tuition hikes is to offer fewer courses to a larger number of students–a combination that would likely result in delayed graduations and more-restricted career opportunities.”

D. Botstein, Leon, “Resisting Complacency, Fear, and the Philistine: the University and Its Challenges,” Hedgehog Review July 2013. Memorable quote: “the fact is that an inefficient institution designed to be creative and innovative–which is what universities are–is one for which one has to resist the argument of industrial and bureaucratic rationalization. A university is an irrational place, a messy place; it needs to be defended as such…[But] We have allowed the American university to be a farm team for professional sports. We have not defended the university by its primary contributions to knowledge, culture, and scholarship–even to the economy.”

E. Brooks, David, “The Practical University,” New York Times, April 5, 2013. Memorable quote: “the problem with the current seminars is that it’s really hard to know what anybody gets out of them. The conversations might be lively, but they flow by so fast you feel as if you’re missing important points and exchanges. The goal should be to use technology to take a free-form seminar and turn it into a deliberate seminar (I’m borrowing Anders Ericsson’s definition of deliberate practice). Seminars could be recorded with video-cameras, and exchanges could be reviewed and analyzed to pick apart how a disagreement was handled and how a debate was conducted. Episodes in one seminar could be replayed for another. Students could be assessed, and their seminar skills could be tracked over time.”

F. Carey, Kevin, “Americans Think We Have the Best Colleges. We don’t.” New York Times, June 28, 2014.

G. Carlson, Scott, “Administrative Hiring Drove 28 Percent Boom in College Work Force, Report Says,” Chronicle of Higher Education, February 14, 2014, Pg. A3.

H. Carlson, Scott, “Survey Suggests Colleges Aren’t Ready for New higher-Education Landscape,” Chronicle of Higher Education, December 6, 2013, pg. A2. A report on Moody’s report, foreseeing a decline in net tuition revenue.

I. Chait, Richard P., and Zachary First, “Bullish on Private Colleges: On the enduring Strengths of Institutions of Higher Education,” Harvard Magazine, November-December 2011, pages 35-39. An optimistic outlook for American higher education.

J. Hockenos, Paul, “University Watch’ Scrutinizes Corporate Influence,” Chronicle of Higher Education, February 14, 2014, pg. A23.

K. James, William, “The Ph.D. Octopus,” Harvard Monthly, 36 (1903):1-9.

L. Kim, E. Han, Adair Morse, and Luigi Zingales, “Are elite universities losing their competitive edge?” Journal of Financial Economics, Vol 93, Issue 3, September 2009, pages 353-381.

M. Kolowich, Steve, “Colleges’ Doubts About MOOCs Continue to Rise, Survey Finds,” Chronicle of Higher Education, January 24, 2014, pg. A17.

N. Leonhardt, David, “Getting Into the Ivies: It’s Harder than it used to be. Colleges are more globalized” New York Times, April 27, 2014,

O. Leonhardt, David, “Is College Worth It?” New York Times, May 27, 2014.

P. Lepore, Jill, “The Disruption Machine,” New Yorker, June 23, 2014.

Q. Marcus, Jon, “Moody’s: College Money Woes are Getting Worse,” Hechinger Report, November 22, 2013.

R. Moody’s Investor Services, “Governance Stress and Economic threats Facing US Higher Education” July 1, 2012.

S. Ripley, Amanda, “Reinventing College,” Time, October 29, 2012 p. 41.

T. Selingo, Jeffrey, “The Innovative University: What College Presidents Think About change in American Higher Education,” Chronicle of Higher Education, 2014.

U. Strauss, Ben, “The Big Ten’s Bigger Footprint,” New York Times, December 1, 2013, page 6.

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Time to Fix Your Debt?

Student debt has been in the news a lot lately, mainly because of its sheer size: some $1.2 trillion of it is outstanding, more than any other class of consumer loans in America. In previous postings (see this and this) I have argued that borrowing to finance your education is a rational strategy, given the high return on investment from getting a solid education and a degree from a serious school. Yet the media abound with stories of students and graduates who borrowed and today find themselves in financial distress. The problem stories we’ve heard about have dealt with people who don’t finish their degrees (about 63% of all college and university students who enroll), who graduate from diploma mills that do little to screen and prepare students for life, or who don’t make use of school to truly strengthen their human capital. Though we wish these borrowers had shown more savvy and commitment, they also deserve our sympathy: they learned too late that debt is a remorseless ruler. One hopes that as the American economy gains strength, we’ll hear fewer of these stories.

Will there be an “Act II” of the student loan crisis? Will rising interest rates throw more student borrowers into distress? What should student borrowers do to protect themselves? Let’s consider this situation.

The Context

Fed Chairman Janet Yellen has announced the likelihood that the Fed will cease buying U.S. Treasurys in October. This is the end of Quantitative Easing the artificial depression of interest rates that was intended to stimulate the growth of the American economy. It is expected that interest rates will rise as the Fed unshackles the debt markets—how fast and orderly that occurs is anyone’s guess. In consequence, student loans whose interest rates “float” with market conditions will become more expensive. The portion of those graduates who have been meeting their obligations, but doing so with difficulty, might sink into distress. Just when we hoped that the student loan issue would go away, it’s baaaack!

Well, maybe yes and maybe no.

Who is exposed? How exposed?

“Act II” will likely have the most relevance for a fraction of student loan borrowers. One expert told me that of the $1.2 trillion in student loans, maybe $150 billion of it is floating-rate paper. Who are these debtors? A recent study by Brookings suggests that graduate students account for a big portion of the growth in student debt. And much of the student floating rate loans are issued in the private debt market. Who borrows there? We have less clarity about this market. But we can guess that it includes people who are shut out of the U.S. government grants and loans, which are mainly fixed-rate and which exclude foreign citizens. International students have grown in significance as a clientele of American graduate degree programs, especially in math, science, engineering—and business. Such students are highly desirable to America’s universities: they are hardworking, dedicated, and pioneering (see my earlier post on international students). In short, international graduates of American graduate schools may be like the canary in the coal mine, a barometer of possible distress from rising interest rates.

The pain of rising interest rates is really a matter of how much debt relative to the student’s income. Here’s a rough example: suppose two students, each of whom accumulated $100,000 in floating-rate debt to finance a graduate degree. But the two graduates follow very different career paths. Let’s say that Jeanne earns $100,000 per year upon graduation; Greg earns $50,000 per year.

  Jeanne Greg
Student Loan Debt $100,000 $100,000
Annual Salary $100,000 $ 50,000
Debt Service before (5%, 10 years) $ 12,720 $ 12,720
Debt Service after (8%, 10 years) $ 14,560 $ 14,560
Change in Debt Service $ 1,840 $ 1,840
Debt Service/Salary before 13% 25%
Debt Service/Salary after 15% 29%
Increase in Debt Service as a % of Salary 2% 4%

The extra $1,840 per year may not be stressful for Jeanne; but Greg will feel the pinch. Jeanne is cushioned by her larger salary; Greg may have to make sacrifices.

This little example overlooks one other important factor: borrowers whose credit rating is decent or has improved will find it desirable to refinance their loans. Most students in school look the same: no earnings. Therefore, one size fits all; the borrowers with strong prospects subsidize the weak. After graduation and a year or two of earnings, it makes sense for the strong debtor to consolidate into a cheaper private fixed rate loan. Strong earning graduates can “afford” to give up some of the “social insurance” such as loan forgiveness, etc on the federal loans in return for a lower priced private loan.  

Getting a “fix”

If you borrowed floating-rate debt, what should you do? Hoping for a government bailout is wishful thinking. Perhaps you could turn to friends and family to help you pay off the loan. Or perhaps you could sell some assets to pay down your debt. Or, if you find today’s interest burden to be manageable, you could lock in today’s interest rate by swapping your floating rate debt for fixed-rate debt. To “fix” your floating-rate loan is a matter of borrowing a new fixed-rate loan and using the proceeds to pay off the floating rate loan.

In the abstract, the question of whether to “fix” your floating-rate debt hinges on a simple comparison: are you better off with fixed or floating rates? Usually, this translates into looking at the cost of borrowing under either type of loan. On the Internet, you can find calculators that will tell you the effective interest rate on a loan. You might think that it’s as simple as comparing the fixed and floating rates of interest. Generally, interest on fixed rate loans is higher than on floating rate loans of comparable term. One might conclude that the decision is easy. Not true. Price isn’t the only thing that matters.

You should also care about risk. Under the floating rate loan, you bear the uncertainty about the future movement of interest rates. And as of today, you face asymmetric risk. Interest rates are at historic lows and have only one way to go: up. With the fixed-rate loan, you have immunized yourself against the uncertainty of future interest rate movements. In effect, you’ve bought an insurance policy in your fixed-rate loan, and that insurance is valuable. Because of this, fixed-rate loans often carry a higher rate of interest than do floating-rate loans: the extra bit of interest expense is like a premium on an insurance policy that immunizes you against rising interest rates. Thus, the simple comparison of the nominal fixed and floating interest rates on student loans makes no sense—the problem is more complicated than that.

Estimating the value of the insurance in a fixed-rate loan entails making assumptions about the future path of interest rates. Doing that requires math and modeling skills beyond the reach of most debtors. [Hint to the MBA reader: this kind of analysis requires a robust simulation model.]

Fortunately, years of observations about how markets price securities tell us that the student debtor who holds a floating rate loan will find it moreadvantageous to “fix” the loan if:

  • You have a lot of debt, relative to your current income.

  • You have a lot of uncertainty about future interest rates.

  • Or you believe that interest rates will rise, rise a lot, and/or rise suddenly.

  • The loan is longer, rather than shorter, in duration—ten years or more certainly qualifies.

  • You can find a fixed interest rate that fits your budget today.

  • The special fees and other costs to refinance are not onerous.

  • Your own income stream (salary plus bonus, for example) is not so stable and/or is unlikely to grow.

  • You don’t have many assets on which you could draw for support if interest rates spike upward.

Under such circumstances, the insurance embedded in a fixed-rate loan will be worth a lot. In any event, the right course of action will depend on your individual circumstances. If any of this describes you, it could be worthwhile to see a financial adviser to gain a detailed assessment of the risk and cost of loan alternatives.

Why fix now?

Still, I can hear the objections. Swapping fixed for floating-rate student loans looks like betting on the future path of interest rates. Even sophisticated finance professionals say that forecasting interest rates is a fool’s errand. And some economists believe that rates won’t rise when the Fed unleashes the debt markets because bad economic news in Europe, Asia, and Latin America suggest that deflation has a powerful grip on the global economy: interest rates could stay low for years. Even America’s growth rate seems unlikely to juice up the debt markets. GDP growth is anemic. The dollar is strengthening, which will dampen exports. The stock market is at historic highs and seems more likely to subside than grow. And political gridlock in Washington, at least through 2016, assures us that fiscal stimulus is unlikely. All of this is not a scenario for rising interest rates. Thus, objectors would say that if you have floating-rate debt, don’t worry, be happy.

My response is that most consumers don’t know what they don’t know. Would you rather eat well (with lower interest rates) or sleep well (immunized against higher interest rates)? [1] If we’ve learned anything from the Global Financial Crisis and Great Recession, it is that history tends to repeat itself, or at least rhyme; that bearish financial trends can move faster than you can outrun them; and that conditions can remain bad longer than you can remain solvent. If this discussion makes you uneasy in some way, then now could be a good time to fix your floating rate debt.

[Disclaimer: I am a Dean of a business school who cares about his students and graduates. I’m not a licensed investment or financial adviser. The reader should seek the counsel of an adviser who can apply sophisticated modeling to one’s specific circumstances.]

  1. To reflect further on this, see Darden’s Biz Basics video of Ken Eades, ‘Eat Well vs. Sleep Well’. []
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Bubble Watching

The S&P500 Index crossed the 2000-mark this past week, fueling more wonderment at the lofty levels of equity prices. As I explained in a recent op-ed, high prices may be telling us something new about innovation that we don’t already know. But in recent meetings with investors, business leaders, and academics, there remains an undercurrent of concern about bubble-like conditions in the markets. The dominant question is, “How do we know if we’re in a bubble?”

What’s a “bubble”?

You must start with the fact that “bubble” conveys a general notion of excessive pricing and irrational investing—but it lends no clarity or bright line to distinguish really dangerous conditions from benign optimism. Peter Garber notes “bubble …is a fuzzy word filled with import but lacking a solid operational definition….if we have a serious misforecast of asset prices we might then say that there is a bubble. This is no more than saying that there is something happening that we cannot explain, which we normally call a random disturbance. In asset pricing studies, we give it a name—bubble—and appeal to unverifiable psychological stories.” [1]

Thus, the absence of science about bubbles summons two rules for bubble-watchers:

· Humility foremost. You have no crystal ball. Therefore, one’s assertions—no matter how emphatically believed—must be tempered with respect for the enormous uncertainty surrounding them.

· Bubbles are best-known in retrospect. Alan Greenspan, Chairman of the Federal Reserve, with all the power and informational advantage of that office, was unpersuaded of a bubble in housing in the mid-2000s. His memoir is worthy reading, on the difficulty of identifying bubbles and of implementing policies to deflate them.

How do we know if we’re in a bubble?

In our book, The Panic of 1907, Sean Carr and I summarized some prominent attributes near the peak of a bubble in asset prices:

  1. Dramatic rise in prices reflected in aggressively high valuation multiples and transactions compared to historical averages.
  2. Buoyant demand for the assets: oversubscribed initial public offerings in equities, numerous participants in auctions for companies, natural resources, and real estate.
  3. Optimism about the sustainability of future price increases.
  4. Entry into the market by naïve, inexperienced, and unsophisticated investors. Bernard Baruch sold his stocks in early 1929 when he started receiving unsolicited stock tips from his shoeshine boy.
  5. Talk of a “new paradigm” rendering long-standing investment maxims invalid. Such was the case during the Internet boom. “This time it’s different” is one of the most dangerous attitudes in investing.
  6. Jumbo deals. These deals change the competitive landscape and/or frame of reference for investors. Travelers Insurance acquired Citicorp in 1998, signaling the end of the regulatory ban on universal banking. The audacity of jumbo deals serves to reinforce “new paradigm” thinking.
  7. Innovations in instruments, institutions, and markets. Leading up to 1907 were the creation of trusts, new national consumer-branded products, and the spread of the telephone, automobile, and household electricity. Joseph Schumpeter heavily emphasized the role of the inventor and entrepreneur in triggering new phases in economic cycles.
  8. Aggressive financing. Banks lower their credit standards to the benefit of borrowers who lots of cheap credit.
  9. Regulators and other watchdogs relax their monitoring of financial intermediaries and investor behavior.
  10. Positive economic news. A recent stretch of growth.
  11. Media hype and considerable popular interest. Rising prices, huge profits, jumbo deals, often to the benefit of Everyman and Everywoman, garner front-page stories.

Several of the items on this list don’t fit the bubble profile as of Labor Day weekend 2014: #10 (positive economic news/growth—few people believe the global economic fundamentals are terribly buoyant); #9 (relaxed watchdogs—the SEC, CFPB, and DOJ seem more rather than less active these days); #5 and #3 (new paradigm thinking and optimism really don’t characterize the investment buzz these days). Absent these points, conditions don’t yet look like a bull market stampede.

On the other hand, some genuine jumbo deals are recently completed or currently pending (#6: USAirlines/American, Valeant/Allergan, Burger King/Horton’s, Family Dollar/Dollar General/Dollar Tree). Global M&A volume is at a seven-year high—so is the global volume of initial public offerings.

And the value of subprime loans is growing, which may go hand-in-hand with the entry of new and inexperienced players in the markets. Recently, the New York Times reported “explosive growth” in the volume of subprime loans for the purchase of used cars.

And, as I discussed in the previous post, prices seem high relative to historical price/earnings ratios. Here’s one measure, favored by Warren Buffett, the market value of US Companies as a percent of the Gross National Product (see more at Bloomberg).


Then, too, there is the concern about aggressive financing. While the whole economy may not feel growing indebtedness, some segments are booming—see the following graph on the call loan market, which fuels equity trading (see more at


Watchful Waiting—and Learning

There is no substitute for vigilance toward bubble-like market conditions. But this doesn’t seem like one of those moments, just before the bursting of the dot-com bubble in early 2000 or the peak of the subprime bubble in 2007. Conditions could melt down for a variety of reasons, unrelated to the bursting of a bubble.

One helpful resource for paying attention to market conditions will be this year’s University of Virginia Investing Conference—November 13-14—the theme of which will be “Investing in Innovation.” Innovation is perhaps the most important foundation for growth, and PVGO. The conference will offer insights about growth prospects in fields such as information technology, energy, health care, and monetary policy. Once again, we are booking an impressive collection of speakers. As of today, speakers will include these (additional speakers are in the offing):

Charles R. Cory (MBA ’82), Chairman of Global Technology Investment Banking & Managing Director, Morgan Stanley
• Richard Fisher, President & CEO, Federal Reserve Bank of Dallas (schedule pending)
• W. Barnes Hauptfuhrer (MBA/JD ’81), Chief Executive Officer, Chapter IV Investors
• Robert J. Hariri, Founder, Chairman & Chief Scientific Officer, Celgene Cellular Therapeutics
• Ned Hooper (MBA ’94), Partner, Centerview Capital
• Robert J. Hugin (MBA ’85), Chairman & CEO, Celgene Corporation
• Samuel D. Isaly, Managing Partner, OrbiMed
• Nancy Lazar, Partner, Cornerstone Macro
• John Siegel, Partner, Columbia Capital
• Michael Sola, Portfolio Manager, T. Rowe Price
• Kathy Warden, Corporate Vice President and President, Northrop Grumman Information Systems  

Today’s financial market conditions are due to a blend of buoyant investor psychology and genuine growth opportunities. If so, this puts a high premium on thinking critically about investment themes, trends, and market sentiment. Conferences are one excellent means of sharpening your own thinking. Join us in November!

  1. Peter M. Garber, Famous first Bubbles: The Fundamentals of Early Manias, Cambridge: The MIT Press, 2001, page 4. []
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Preparing Women for Leadership in Business–What Darden Is Doing

Last April, I blogged about my reflections on the status of women in business schools. My post followed various meetings I’d had with a range of corporate leaders, Admirals in the Navy, and senior counselors in the White House. I was struck by the unanimity with which they expressed the need to develop more women in the rising generation of leaders. I concluded that there is increased consensus regarding the importance of gender diversity and inclusion in American business society and that no one thinks the progress is acceptable—nor do I.

Women hold up half the sky, but they account for only a small fraction of senior and middle-managers, corporate directors, partners of professional service firms, entrepreneurs, etc. The reasons for this have to do with cultural, legal, and economic factors, many of which seem to be changing. Although the women’s movement, which began several decades ago, has led to increased opportunities for women, there still needs to be a larger societal commitment to developing extraordinary women leaders. This development should begin in early childhood and progress through post-secondary education. Leading business schools have a vital role to play.

Where is Darden in this? In 2015, Darden will celebrate 50 years of women business leaders. We want Darden to be the go-to place for women executives of exceptional talent and promise. We have undertaken a range of initiatives to prepare women for leadership in business. Let me describe these.

As preface to this sketch it is useful to state the obvious: schools will find it easy to do something—the question is, “Are schools doing the right things, to ensure that women are well-prepared to excel in business school and in the business world?” As I discussed earlier, b-schools are focused on trying to determine what is right. Therefore, this feels like a pivotal moment. No less is happening within Darden. There is no checklist, guidebook, or user’s manual that dictates what business schools should do right. Thus, Darden is intentionally trying a range of experiments, projects, and prototypes. Distinguishing doing the right thing from doing just something is our intention – both within Darden and in the world of practice. This requires careful design and evaluation that inform ongoing efforts. What follows is not just a list of some things, but rather our path toward the right things.

Consider these activities under three umbrellas:

· Educating women about business school and encouraging them to enroll at Darden.

· Providing opportunities for women to develop as leaders while they are students at Darden. The necessary conditions for development are intrinsic motivation and opportunity, which is why we emphasize “opportunities.”

· Empowering women graduates of Darden to advance their careers through networking and professional development

1. Darden aims to educate women about business school and to encourage them to enroll.

Program for Prospective Student Women. Darden is known for having a tight-knit community. In order to give women in the pipeline a more personalized introduction, the Office of Admissions and the Graduate Women in Business club offer the 1:1 Program for prospective women students. The program pairs prospects with a current woman student mentor in late summer to facilitate a one-on-one connection with a member of the Darden community. Previous participants have found that this is not only an excellent way to learn about the School, the student community and the myriad academic opportunities and resources but also to explore the many issues facing women pursuing graduate business education.

Sponsor of the Forté Foundation. Darden is proud to be a founding partner of the Forté Foundation, a non-profit consortium of top companies and leading business schools committed to helping women pursue leadership roles in business. While every woman at Darden can join Forté, each member school also has the opportunity to select Forté Fellows, who receive merit-based scholarships based on their outstanding professional, academic, and personal accomplishments. In addition to the financial support provided through fellowships awarded by individual Forté member schools ($45MM in scholarships awarded to 2,300+ recipients), Fellows gain exposure to leading companies in the Forté network, as well as an immediate peer group of Fellows that extends beyond their individual business school. Darden typically has approximately 40 Fellows per academic year. All women at Darden with a $10,000 scholarship or greater are Forté Fellows.

2. Darden provides opportunities for women to develop as leaders while they are students.

Darden’s student club, Graduate Women in Business (GWiB), is leading a range of initiatives.

  • Mentoring program. Each year, First Year (FY) and Second Year (SY) female students are paired up as mentor and mentee. This provides incoming women with a resource to ask any and all questions they may have – from how to best prepare a case to getting ready for an interview.
  • Relationships across Grounds. GWiB has connected with the University of Virginia McIntire School of Commerce’s women students in a networking and mentoring capacity. Seven Darden women sat on a panel hosted by McIntire to discuss the process of applying for graduate business school.
  • Annual conference and workshops. GWiB is active in sponsoring a well-attended annual conference, which often features alumnae in key speaking roles. They also sponsor smaller workshops and panels throughout the academic year. Additionally, GWiB held a negotiations workshop with Professor Melissa Thomas-Hunt to teach students how to become better at negotiating their pay/salary/signing offers.
  • Friends of GWiB. The impetus for the program was for women students to invite their male peers to be involved in the conversation about women in the workplace. Men have always been welcome to join as traditional GWiB members, but this initiative was developed to actively seek them out. Some of the goals and activities include: educating male peers on what exactly women discuss when they gather in professional settings and educate them on general “workplace issues”; including faculty members who have had a breadth of experience and could provide an alternate view and voice to the conversation.
  • Points of contact. GWiB has a 1:1 program that matches prospective women applicants with current women students.
  • C-suite contacts. Several prominent alumnae have reached out to GWiB to host small group gatherings in Charlottesville to provide engaging conversation and advice.

Women in Success Seminar (Professors Luann Lynch and Mary Margaret Frank). A popular seminar last academic year, it entailed field interviews of men and women business leaders; class discussions of readings on women leaders and the challenges facing women in leadership (such as Sheryl Sandberg’s book, Lean In); and essays on women leaders and personal reflections on success.

NOLS Leadership Program. Professor Yael Grushka-Cockayne led a National Outdoor Leadership School (NOLS) leadership program that took place in January. Each student had the opportunity to lead a daily expedition in the Arizona desert. Thirteen students attended (7 men and 6 women) and one alumna. The course focused on developing leadership through leveraging diversity and inclusion.

Newly Transformed Career Education for All Current Students. A series of discovery forums take place the first week on Grounds for FY students. The forums include:

· Perspectives on Career Success

· Being an Adviser to Corporations: Careers in Consulting and Investment Banking

· Becoming a Corporate Leader I: Careers in Marketing, Strategy and Business Development

· Becoming a Corporate Leader II: Careers in Finance, Operations and Supply

· Becoming an Owner: Paths to Consider Now and in the Future

· Mission-Driven and Global Opportunities: Perspectives from Darden’s Institute for Business in Society and Center for Global Initiatives

Second Year Coaches. A unique feature of Darden’s career development offerings is the SY Coaches program. In addition to being assigned a professional, functionally-aligned career advisor, all FY students are assigned a SY coach based on various industry categories.

Leadership Speaker Series. Darden actively seeks to bring to Grounds women who are role models of leadership. Four of the nine speakers last academic year were women:

Martina Hund-Mejean (MBA ’88), Chief Financial Officer of MasterCard Worldwide; Carolyn Miles (MBA ’88), President & CEO of Save the Children; Lorna Donatone, Chief Operating Officer, Sodexho; and Sharon Decker, Secretary of Commerce of the State of North Carolina.

Surveys of the Experience of Women Students and Alumnae. We conducted focus group meetings on the experiences of women in their learning teams. In addition, we prepared a survey with GWiB of SY women about their FY experience. Darden’s alumnae are more engaged than the alumnae population of business schools in general.

Women@Darden Initiative. The purpose of this initiative is to examine and recommend actions to improve the quality of the Darden experience for prospective and current women students and alumnae. We are at the beginning stages of an enterprise-wide effort to engage faculty, staff, alumnae and other key stakeholders on how Darden can bolster our women students and alumnae. Under the umbrella of a steering committee, three sub-committees will examine:

· Women student recruitment and admission. Increasing the number and quality of women students is very important to sustaining the strength of Darden’s learning experience. We will focus on increasing the number and quality of women prospectives applying to Darden. The aim is to increase the number of women students enrolled in all of Darden’s MBA programs.

· The experience of women both inside and outside of the classroom. Improving the Darden experience for women students benefits all students. We focus on curricular and co-curricular content and student experiences. And we will consider how to increase financial aid for women students.

· Alumnae engagement. A robust alumnae engagement effort is central to honoring Darden’s mission of developing and inspiring responsible leaders and advancing knowledge. We aim to increase the quantity and quality of alumnae engagement opportunities.

3. Darden empowers alumnae to advance their careers through networking and professional development.

Darden’s Armstrong Center for Alumni Career Services (ACS) provides career help for all alumni—and specific programs for assisting women:

  • One-on-one Career Advising and Coaching. ACS provides unlimited number of sessions to our alumni to assist in all areas of career management with the majority of that coaching in the area of career transition. In this capacity, ACS has worked with 33% of our total number of alumnae. Coaching on how to “stay in,” “get back in,” or “rise in rank” is common.
  • “Re-entering the Workforce” workshop for alumnae conducted by Darden ACS. This two-month long workshop (including pre-work, two day-long sessions and follow-up) has been delivered to over 200 participants in seven locations (Washington, D.C., Boston, NYC, London, Palo Alto, Atlanta, Chicago). The workshop includes self-assessment, evaluation of work-life fit issues, the redevelopment of one’s professional brand and job search techniques after a hiatus.
  • Pay Equity. ACS and CDC coaches assist individuals one-on-one with salary negotiations – assisting in research of market rates and strategies to negotiate for the highest possible compensation often pointing out gender differences in negotiating and helping women avoid common pitfalls.

Volunteer leadership positions on Darden’s boards, advisory groups, and local clubs. We are actively recruiting alumnae into leadership positions. This affords them opportunities to network and exercise skills such as communication, advocacy, facilitation, and team-building. This summer, Elizabeth Weymouth (MBA ’94) was elected Vice Chair of the Darden School Foundation Board of Trustees. She will rise to Chair of the Board in 2016. And the Women@Darden initiative has energized more alumnae to organize new local groups.

Alumnae Engagement. Generally, we are striving to improve and strengthen Darden’s engagement with alumnae. The mission of the alumnae groups in Washington, D.C. and New York is to:

· Engage – through networking and relationship building, our objective is to keep Darden’s women support for one another strong and valuable.

· Education – through relevant and provocative presentations, readings and discussions, our goal is to keep Darden as a key component of our ongoing professional development.

· Service – through monthly interactions, our objective is to collectively create opportunities to serve the Darden community.

In addition, alumnae groups are forming in other localities.

Executive Education. Darden’s highly ranked Executive Education open-enrollment programs focus on leadership development, including The Women’s Leadership Program and The Executive Program. Other programs include: Leading Organizational Effectiveness; Managing Individual and Organizational Change; Power and Leadership: Getting Below the Surface; and Servant Leadership: A Path to High Performance.


Darden’s Class of 2014 graduated last May having achieved some milestones. These include having the highest percentage of women enrolled (35%) and the highest percentage of women in positions of leadership of clubs and student government (60%) in Darden’s history. Women presidents ran some of the School’s largest clubs, including the Consulting Club, Marketing Club, Finance Club and General Management and Operations Club.

I heard the Class of 2014 student evaluation of their learning experience at Darden: women expressed a high level of satisfaction, consistent with men. And this month, two of the three new faculty members hired this year are women—adding strength to a great team of women professors. These and other metrics suggest that Darden is making strides in contributing to the preparation of women for leadership in business. I’m pleased to report that the Class of 2016, which we enrolled last week, is poised to make its mark.

…And I would say that work remains to be done, for Darden and all b-schools. Excellence is a moving target. The initiatives that schools take today are merely a foundation for strides we must make tomorrow. What is at stake is not just the role of women, but rather the caliber of all leadership: Sheryl Sandberg, COO of Facebook, wrote, “In the future there will be no female leaders. There will just be leaders.”

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From Quarterdeck to Forecastle: Welcome to the Class of 2016

[This afternoon, I welcomed the Darden Class of 2016 to the school. What follows are approximately my remarks.]

On vacation some years ago, I signed on as a crew member of a tall ship in the North Sea. This was a reproduction of an 18th Century frigate: three masts, a great deal of rigging, and cramped quarters. We stood watch, four hours on and four hours off, so it was impossible to get a good night’s sleep. When the wind changed, everyone was put to work hoisting sails or stowing them—this had to be done, in good weather and bad. I’m not wild about heights, especially when on a rope ladder high above a rolling ship. The food, prepared by a cook, was mediocre at best. By the end of the week I was exhausted.

When I returned from vacation, I told a friend that I had had a great experience. He shook his head in disbelief and said, “What was great about it? You’re a leader at Darden but you spent the whole week as an unpaid laborer who had to take orders from the captain. Lots of shouting; do this and do that. There was no rest and relaxation. What were you thinking?” My reply to him contains some ideas that are relevant as you embark on your own journey at Darden.

I should say that my reflections on that experience have continued over time. Ann Landers, the advice columnist, famously said that in school you get the lesson first and then the test; but in life, you get the test first and then the lesson. That sailing experience was a real test. And the learnings have followed.

In Herman Melville’s novel, Moby-Dick, the main character explains why he wants to go to sea as an ordinary sailor. The year is maybe 1850 and the voyage is to be on a whaler. It is hard and dangerous work. Why would someone do this? The lead character explains,

“I always go to sea as a sailor, because of the wholesome exercise and pure air of the fore-castle deck. …for the most part the Commodore on the quarter-deck gets his atmosphere at second hand from the sailors on the forecastle. He thinks he breathes it first; but not so. In much the same way do the commonalty lead their leaders in many other things, at the same time that the leaders little suspect it.”

Think about it. Melville is saying that the folks away from the seat of power know something more than do the leaders. To go down from the important place you are used to, to a place at the front of the ship teaches you things that you can’t get on the quarterdeck.

The post on the frigate that I liked best was standing watch at the bowsprit, the forward-most point of the ship. You are there all alone looking forward through the fog, trying to understand what you are sailing into and then communicating it in a way that the people back on the quarterdeck can understand. You are the first person to get a glimpse of the future. This is a view that can’t be had elsewhere on the boat. And the experience is magical. The playwright, Eugene O’Neill, wrote,

“I lay on the bowsprit, with the water foaming into spume under me, the masts with every sail white in the moonlight towering above me. I became drunk with the beauty and singing rhythm of it, and for a moment lost myself. Actually lost my life. I was set free—dissolved in the sea, became white sails and flying spray, became beauty and rhythm and the high dim-starred sky—I belonged within a unity and joy to life itself.”

To feel “lost,” “drunk,” and “dissolved in the sea” is akin to what many artists, athletes, and leaders have described as the sense of flow : fully immersed, energized, and feeling intense joy of being at the head of their field, the top of their game, at the point of the bowsprit. It’s easy to see why flow might happen at the bowsprit: it’s where one is looking out to the wider world, looking ahead, and indeed, looking inside oneself. At that kind of moment, you are fully invested in what you do.

Metaphorically, the bowsprit and forecastle represent the frontier of your field or your enterprise. It’s the place where one learns the most. Today, so much of what we value about business and capitalism—such as invention, efficiency, effectiveness, adaptability—depends on how organizations and people learn. Melville challenges us that the best learning may not be on the quarterdeck (at the back of a ship), but rather on the forecastle (toward the front).

The big idea here is that from time to time in one’s life, one must step down from the quarterdeck in order to take risks, get out in front, learn, and grow as a leader. The quarterdeck can be its own little world, freighted with tradition, security, and old assumptions about how the world works. From the back of the ship, it is certainly more difficult to look out ahead.

I’m telling you this because you-all are like me on the frigate: most of you have left interesting and comfortable circumstances to get out to the frontier of ideas and learning. You’ve been here one week and are probably wondering what you’ve gotten yourselves into.

This is the right time in your lives to be here. Many graduates have volunteered that Darden was a transformational experience; it changed their lives for the better. I believe you will say the same.

So, to conclude the story, what I replied to my astonished friend went something like this: “It was a great experience because of what I learned about myself and others; I grew in confidence. And I gained an incredible new perspective on teamwork and nature that couldn’t be obtained any other way. I learned that followers can lead the leaders. When you lose yourself in a worthy challenge, you can actually find yourself. And I found that the forecastle can be a better place than the quarterdeck. I had to live the experience to learn those insights.”

My experience on the frigate suggests the frame of mind you will need so that 21 months from now, you can say that Darden was a “great experience.”

  • Trust the process. Trust that the questioning by the professors is leading you somewhere. They want to help. And you came to study with the world’s best teachers. So, form a relationship with them that feeds your development. Don’t look for grandiose speeches, easy answers, or compliments; look for wise and candid feedback. Accept and admire professors who demand your very best.

  • Be present. I saw a sign once at a Las Vegas casino. It was hanging over the roulette table and said, “You must be present to win.” This meant that you could not place your bets and then leave the table to get a drink or see a friend, and return later to pick up your winnings. You had to be present when the winnings were declared, in order to get them. So it is at Darden. You must be present to win. “Being present” means being mindful: self-aware of your state of mind and your impact on others. And it means being socially aware of what’s going on around you. You can’t “zone out” and get the rich transformational experience that Darden offers. Mindfulness is one of the top attributes of high-performing leaders. So this is good practice for your future. When I describe Darden as a “high touch” community, I’m referring to a community where students, faculty, and staff are present and engaged actively in the learning process. “Being present” also means engaging others who may be very different from yourself—a different race, nationality, sexual orientation, or gender for instance. Make a serious effort to see the world through their eyes. Befriend those people. Share the Darden experience with them. If you find yourself drawn constantly to a few classmates just like yourself, you aren’t really present. If you don’t test your assumptions about people different from yourself, you aren’t really present. If at the end of two years, your comfort zone is no larger than it is today, you have not been really present.

  • It’s a marathon, not a sprint. Pace yourself. There are lots of enticing activities at Darden. And you don’t need to do them all at once. Find your sustainable stride and patiently head toward the finish line.

One final reflection: the bowsprit and forecastle are vivid metaphors for me yet today. As most of you know, in 11 months, I’ll make a transition from the quarterdeck of the Dean’s office to go back to the forecastle of faculty and staff. I’m content and think this makes great sense for Darden and for my life at this point.

So if I can model something for you this year, it is the virtue of periodically stepping down from the quarterdeck and moving to the forward-most point of your environment or enterprise. Being Dean has been tremendously fulfilling. And I’d like to get back on the bowsprit, looking forward through the fog. In the next 21 months, you and I will be there together.

I believe that you will succeed beyond your dreams if you commit very deeply to the experience ahead of you. Godspeed and good luck.

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Pricey U.S. Equities—Implied Innovation?

What are we to make of the following graphs? Figure 1 presents the long historical view of the Price-to-Earnings ratio on the S&P500 Index. Figure 2 presents a similar view, adjusting the P/E ratio for the impact of inflation on earnings.

Figure 1

Standard Price/Earnings Ratio for the S&P500 Index (average of all companies)

Current S&P 500 PE Ratio: 19.04 -0.19 (-0.97%)

4:29 pm EDT, Tue Aug 5

Mean: 15.52  
Median: 14.56  
Min: 5.31 (Dec 1917)
Max: 123.73 (May 2009)

Price to earnings ratio, based on trailing twelve month “as reported” earnings.
Current PE is estimated from latest reported earnings and current market price.
Source: Robert Shiller and his book Irrational Exuberance for historic S&P 500 PE Ratio.

Figure 2

Cyclically-Adjusted Price-Earnings Ratio for the S&P500 Companies


Current Shiller PE Ratio: 25.39 -0.25 (-0.97%)
4:29 pm EDT, Tue Aug 5

Mean: 16.54  
Median: 15.93  
Min: 4.78 (Dec 1920)
Max: 44.19 (Dec 1999)

Shiller PE ratio for the S&P 500.

Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10 — FAQ.

Data courtesy of Robert Shiller from his book, Irrational Exuberance.

Against these measures, stock prices today seem high. Looking over the last 130 years, you see big spikes in P/E ratios suggesting bubbles “irrational exuberance” in advance of capital market instability (1929 stock market crash, the Internet bust of 2000, and the Panic of 2008). Apart from those extreme events, the P/E ratios of 19x to 25x are relatively high. Is this a run-up to another bubble? What questions should the canny observer ask about high P/E ratios?

Let me frame a (wonkish) reply in terms of finance theory, which suggests that the size of a multiple is driven by two main factors: risk and expected growth. For instance, the widely-used Price/Earnings multiple can be decomposed into two factors:

Stock Price/E(EPS) = 1/r + PVGO/E(EPS)

E(EPS) is the earnings per share expected to be reported next year. The factor “r” is the required return on equity, which is determined by risk. And PVGO [1] is the present value of growth opportunities per share, an estimate of today’s value of investments expected to be made in the future. The term, “growth company,” is not defined by the growth rate of sales, earnings or assets, but by the size of PVGO relative to the market value of equity.

In other words, the P/E ratios of “growth firms” are typically sizable, and driven significantly by attractive future growth opportunities. One can decompose other ratios in a similar fashion. But the key idea is that multiples reflect important economic phenomena. To judge whether a multiple is appropriate, one should look into the underlying economic fundamentals and critically evaluate the assumptions of the model. [2]

So, let’s consider the possibilities. Suppose that “r” is 10%, the going risk-adjusted rate of equity return for the average low-growth firm, such as a public utility. Therefore, 1/r would equal 10.0. Compared to the average P/E ratios for the S&P500 (either 19 or 25), this implies that the present value of growth opportunities these days is simply enormous, accounting for 45-60% of the value of the S&P500. What might explain this huge growth component?

One possibility that you hear mooted on financial talk shows is that the market is “overheated,” “getting ahead of its skis,” and even, “a bubble.” We’ve certainly seen frothy conditions before and shouldn’t be surprised to see them again. The problem is that you could summon up some kind of psychological explanation for market conditions virtually any time. Psychology is always useful as a warning flag; but it won’t tell the investor exactly what to do. Generally, if you think that the market is getting overheated, you might cash out, buy put options, or sell short. But research suggests that trying to time the market by trading actively is an easy way to lose money.

A second possibility is that investors embrace some realistic growth phenomena that justify these huge PVGOs. If so, the canny investor should try to identify the source of these growth opportunities. One helpful resource will be this year’s University of Virginia Investing Conference —November 13-14—the theme of which will be “Investing in Innovation.” Innovation is perhaps the most important foundation for growth, and PVGO. The conference will offer insights about growth prospects in fields such as information technology, energy, health care, and monetary policy. Once again, we are booking an impressive collection of speakers. As of today, speakers will include these (additional speaker are in the offing):

  • Charles R. Cory (MBA ’82), Chairman of Global Technology Investment Banking & Managing Director, Morgan Stanley
  • Richard Fisher, President & CEO, Federal Reserve Bank of Dallas (schedule pending)
  • W. Barnes Hauptfuhrer (MBA/JD ’81), Chief Executive Officer, Chapter IV Investors
  • Robert J. Hariri, Founder, Chairman & Chief Scientific Officer, Celgene Cellular Therapeutics
  • Ned Hooper (MBA ’94), Partner, Centerview Capital
  • Robert J. Hugin (MBA ’85), Chairman & CEO, Celgene Corporation
  • Samuel D. Isaly, Managing Partner, OrbiMed
  • Nancy Lazar, Partner, Cornerstone Macro
  • John Siegel, Partner, Columbia Capital
  • Michael Sola, Portfolio Manager, T. Rowe Price
  • Kathy Warden, Corporate Vice President and President, Northrop Grumman Information Systems

“Early bird” registration discounts end tomorrow, August 8th. Sign up this week to get the highest return on your conference investment.

In all probability, today’s high P/E multiples are due to a blend of buoyant investor psychology and genuine growth opportunities. If so, this puts a high premium on thinking critically about investment themes, trends, and market sentiment. Conferences are one excellent means of sharpening your own thinking. Join us in November!

  1. Stewart Myers originally suggested the important role of growth options in the valuation of the firm. See his paper, “Determinants of Corporate Borrowing,” Journal of Financial Economics, 5:146-175 (1977). The decomposition of P/E presented here is discussed more fully by Myers in his book with Richard Brealey and Franklin Allen, Principles of Corporate Finance. []
  2. Though widely used, and simple to use, investing on the basis of P/E multiples is vulnerable to several potential problems, such as the dependence on GAAP accounting practices, which afford managers rather wide latitude in reporting the financial results of the firm. Also, the P/E ratio can be computed using backward-looking or forward-looking earnings. For growing firms, the difference in financial performance between the year just past and the year ahead will be material. In addition, a focus on Earnings per Share ignores important effects of capital investment, investment in working capital, and depreciation. []
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