No Mercy, No Malice

Universities are an expensive operation with a relatively inflexible cost structure, and it’s forcing many schools to make poor choices

Scott Galloway

Jul 21, 2020·7 min read

Our fumbling, incompetent response to the pandemic continues. In six weeks, a key component of our society is in line to become the next vector of contagion: higher education. Right now, half of colleges and universities plan to offer in-person classes, something resembling a normal college experience, this fall. This cannot happen. In-person classes should be minimal, ideally none.

The economic circumstances for many of these schools are dire, and administrators will need imagination — and taxpayer dollars — to avoid burning the village to save it. Per current plans, hundreds of colleges will perish.

There is a dangerous conflation of the discussion about K-12 and university reopenings. The two are starkly different. There are strong reasons to reopen K-12, and there are stronger reasons to keep universities shuttered. University leadership needs to evolve from denial (“It’s business as usual”) and past bargaining (“We’ll have a hybrid model with some classes in person”) to citizenship (“We are the warriors against this virus, not its enablers”).

Think about this. Next month, as currently envisioned, 2,800-plus cruise ships retrofitted with whiteboards and a younger cohort will set sail in the midst of a raging pandemic. The density and socialization on these cruise ships could render college towns across America the next virus hot spots.

Why are administrators putting the lives of faculty, staff, students, and our broader populace at risk?

The ugly truth is many college presidents believe they have no choice. College is an expensive operation with a relatively inflexible cost structure. Tenure and union contracts render the largest cost (faculty and administrator salaries) near-immovable objects. The average salary of a full professor (before benefits and admin support costs) is $104,820, though some make much more, and roughly 50% of full-time faculty have tenure. While some universities enjoy revenue streams from technology transfer, hospitals, returns on multibillion-dollar endowments, and public funding, the bulk of colleges have become tuition dependent. If students don’t return in the fall, many colleges will have to take drastic action that could have serious long-term impacts on their ability to fulfill their missions.

That gruesome calculus has resulted in a tsunami of denial.

Universities owning up to the truth have one thing in common: They can afford to. Harvard, Yale, and the Cal State system have announced they will hold most or all classes online. The elite schools’ endowments and waiting lists make them largely bulletproof and more resilient to economic shock than most countries — Harvard’s endowment is greater than the GDP of Latvia. At the other end of the prestige pole, Cal State’s reasonable $6,000 annual tuition and 85% off-campus population mean the value proposition and underlying economic model remain largely intact even if schooling moves online.

Who Thrives, Survives, Struggles, or Perishes?

Over the past month, we assembled a worksheet that looks at the immunities and comorbidities of 436 universities included in U.S. News & World Report’s Best Colleges rankings. This dataset compiles numbers from the Integrated Postsecondary Education Data System (IPEDS) maintained by the U.S. Department of Education, U.S. News & World Report, Google Keyword Planner, Niche.com’s Student Life Grades, and the Center on Education and the Workforce. This dataset should not be taken as peer-reviewed or final. It’s a working document that seeks to analyze and understand the U.S. college and university landscape and to help universities craft solutions.

We plotted each university across two axes (four quadrants):

• Value: (Credential × Experience × Education) ÷ Tuition.
• Vulnerability: Endowment ÷ Students and Percentage of International Students. Low endowment and dependence on full-tuition international students make a university vulnerable to Covid-19 shock, as they may decide to sit out this semester or year. Consumers generally don’t like to pay the rack rate at a hotel whose general manager harasses them and is a bigot. But I digress.

Quadrants:

• Thrive: The elite schools and those that offer strong value have an opportunity to emerge stronger as they consolidate the market, double down on exclusivity, and/or embrace big and small tech to increase the value via a decrease in cost per student.
• Survive: Schools that will see demand destruction and lower revenue but will be fine, as they have the brand equity, credential-to-cost ratio, and/or endowments to weather the storm.
• Struggle: Tier 2 schools with one or more comorbidities, such as high admit rates (anemic waiting lists), high tuition, or scant endowments.
• Perish: Sodium pentathol cocktail of high admit rates, high tuition, low endowments, dependence on international students, and weak brand equity.

The worksheet is here. Our aim is to catalyze a conversation about how universities can adjust their value proposition.

Phase 3 Spread

The United States has 4% of the world’s population and 25% of the world’s Covid-19 infections and deaths. Phase 1 of the spread was enabled by a mix of arrogance and incompetence. It appears the virus did not get the memo about our exceptionalism and is indifferent to our optimism. The venues for spread were cruise ships and nursing homes. Phase 2 found governors infected with the same arrogance, enabling a younger generation of superspreaders. Again, the virus appeared rude and unwilling to read the room and recognize our desire to return to normalcy. A Phase 3 wave appears to be forming, due to a mix of economic pressure and lack of imagination on the part of academic leadership.

“These plans are so unrealistically optimistic that they border on delusional and could lead to outbreaks of Covid-19 among students, faculty, and staff,” says Laurence Steinberg, PhD, a psychology professor at Temple University.

Small college towns across the country are being set up for disaster. Distancing, plexiglass, quaranteams, reconfigured dorms, A/B class shifts—all efforts taken in good faith, doubtlessly endorsed by medical advisers. But on-campus measures will only be effective with adherence to off-campus measures. It’s delusional to think students will keep six feet apart.

The bucolic, culturally rich college towns across the United States may pay a steep price. Many are not prepared for a surge of infections. Some have permanent populations with high numbers of retirees attracted by the cultural benefits of a nearby college. Other at-risk cohorts include cafeteria workers, maintenance crews, security guards, librarians, bartenders, cab drivers, their spouses and family members, and anyone else unfortunate enough to have made the once perfectly reasonable decision to live in a college town. And if/when there is an outbreak, the health care infrastructure of these university towns could be overrun in a matter of weeks, if not days.

What Needs to Happen

University leadership across the United States should immediately announce that fall classes will be all online, no in-person classes. It will be economically devastating for the weakest. State governments desperate for cuts in the face of shrinking tax revenues will need help from the federal government: If we can give Kanye $5 million, we can help save Purdue. The fed just expanded the Main Street Lending Program to nonprofits, including universities. Alumni who have parlayed their education into fortunes should step up and make sure the next generation can follow.

But assistance will only go so far. Schools will have to undertake what firms ranging from Nike and Condé Nast to Wells Fargo and Walgreens have done: cut costs and prices. Most important, colleges should not waste this crisis and should demand their organization become facile with big and small tech to dramatically increase enrollments while lowering costs.

College-town elected officials and their universities should regulate the incursion of superspreaders and ask most/all to take their online classes from home. Living on campus and taking classes online, as Harvard is doing, is dangerous but possibly worthwhile, especially for vulnerable populations like international students, who were threatened with deportation. Creative solutions can be found. Explore all options instead of being in denial. Denial is more expensive than facing reality.

University leadership and faculty aim to help young people find their greatness. Part of that charge is to instill grit, perspective, a sense of curiosity and innovation, citizenship, and a comity of man. We should lead by example.

Life is so rich,

Scott

P.S. Join us for a live Prof G Show recording, a panel on the future of higher ed, August 6, 6–7:30 p.m. ET. Sign up and you’ll have a chance to ask us a question. On this week’s episode, I spoke to Obama health care alum Andy Slavitt about the prospects for a vaccine and how the government can help.

Update: We’ve amended the above post to more accurately reflect the average salary of a full professor across universities.