Stig Leschly on Innovating Within Higher Education

I think it’s a problem Tom 50 years in the making. And from a certain perspective, a very obvious one in public policy. I think we’ve set up a public policy in higher ed where it’s almost a guaranteed outcome that we end up where we are now where these things are overpriced. They’re stagnant in their designs and they don’t result in jobs and it’s because the public policy has basically created a sector where you can’t get new fresh teams in to start colleges and the existing colleges are under no pressure from competitors. They’re not really held accountable. And at the same time, the government is massively funding this thing.

So I think when you set up that sort of sector, it’s no surprise to me that 20, 30, 40 years later, we are where we are with these high prices, low graduation rates, a lack of innovation and very unreliable jobs outcomes. So it’s a sector and policy problem. You’re listening to the getting smart podcast. I’m Tom Van Der Arc and today I’m joined by my friend, Stig Lesley. Stig and I met 25 years ago, I guess in Seattle where he was a tech entrepreneur. He has gone on to be a senior lecturer at Harvard Business School for a number of years. He ran the well known Match Charter School, which piloted personalized tutoring as well as new pathways, affordable pathways into higher education.

Stig, when he’s not teaching at Harvard, has founded a new nonprofit called College 101 to advocate for innovation in higher education. Stig, welcome to the Getting Smart podcast. What led you to take on the challenge of higher ed and give a list of the world’s big problems? So, boy, Tom, you said a lot there. The, I think the short version is, I, you know, yes, I was in the beginning Tom, a high tech entrepreneur. And after a phase of doing that, decided to devote myself around the time we met decades ago to K-12 initially.

And then for those many years at Match ran the charter schools with my friends there and so on. In the course of all that long story short time, we began to try to get active in higher ed. We were K-12 people, we were graduating class after class after class of students into the higher ed system. We were getting more and more worried about its breakdowns and its problems. And so we started a graduate school of education at one point and separately set out actually to open up a community college. There’s a long story there, but became very active and interested in it.

You guys also had a partnership with Southern New Hampshire University as well. You were a big picture of one of the pilots. So you were actively looking for new accelerated affordable pathways through higher ed, right? I would say yes, exactly. I mean, it’s even simpler than that time. We actually woke up one day and said, let’s go build a college. And for reasons that we can get into the difficulties of entry in higher ed, particularly the difficulty of getting accredited, we essentially could not. And so as an alternative, we partnered with Paula Blanc and SNU and built one of the early so-called hybrid colleges where Southern New Hampshire runs essentially a thin college.

That’s how I would describe it. They provide the curriculum, they grade the work, they should degree. But we locate the student and we coach the student through. So in partnership with them, we do the wraparound services. They provide sort of core curriculum financial aid processing and degree granting functions. And that was as close as we could get, Tom, to becoming a college. But it’s on the back of that, that sort of college 101 dawned on me.

So, Stig, you walk us through the problem you’ve spent a year now thinking about the solution. How do you think about the potential solution set? I, this is an unusual moment for me where I see a social problem and a public policy problem and where I, and I suppose I could be wrong, Tom, but I sincerely believe that there is an opening for transformative, relatively straightforward public policy in higher ed. And in a phrase, it’s to create a pathway into higher education, into formalized accredited higher ed for really competent nonprofit social entrepreneurs to start colleges that are really tightly regulated. So essentially, I’m interested in new arrivals in higher ed that can, as in the context of true college startups seek really innovative designs that completely break the mold on cost and on quality. That’s essentially impossible now. And I, that has to do with this super boring but super important thing called accreditation, which I love to talk about, but will probably cost most of your readers to turn the podcast off.

So I’ll try to be economical when I talk about it. But essentially, Tom, the road to new arrivals in higher ed, the road to sort of a startup nonprofit college movement runs through accreditation reform. I think if you can get new arrivals, new supply, really break out models into higher ed, you could really put pressure on higher ed in a productive way because students can choose very rapidly in higher ed. Tom, it’s one of the things that distinguishes it from K12. About half the funding for higher ed is directly on the student side. It’s mainly the Pell Grant and the federal loan. So students can choose. There’s a lot of money that’s supply side. It’s all the state money that’s locked up in incumbent colleges. But the public funding policy in higher ed is very significant in the demand side. So if you get better solutions in there, students will vote with their feet.

You know, we were corresponding over the weekend about this and I said, well, there has been a startup sector. All the big tech players have launched their own pathways to high wage employment. A lot of them are credentialed and you reminded me there was one big problem with all these informal learning opportunities. What is that? Well, so first of all, let me normalize what you’re saying, Tom, which is most training in America, most education in America, most jobs at Preparation America has nothing to do with higher education. Let’s be honest about it. It’s done by companies and a variety of nonprofits. It’s wonderful. I find it highly innovative. It’s thriving in its own way. In fact, number two, there’s $250 billion annually in federal funding that goes to 4000 institutions called colleges. It’s heavily subsidized.

And hence the opportunity, which is, can we optimize that funding flow better so that it goes to more innovative, more functioning, higher producing colleges? That’s the problem that interests me. And I will say, you know, colleges are so heavily subsidized that it does actually crowd out private sector innovation often because what we’ve gone about that, but like something like 80% of the revenue in a community college, for example, is public funding. So these things are heavily subsidized. And so in a phrase, Tom, I’m very interested in just trying to get, since we do have a thing called college in America, and since the government gives a couple hundred billion dollars are cashed to it a year, and another hundred billion and subsidized loans essentially, since that exists. The task is to make those organizations function better, do better, be more innovative, and hence the need to get new arrivals into that space to trigger innovation, productive competition.

Well, those subsidies that you’re describing, those are both funding that goes direct to colleges, but it’s also loan dollars and grants that go to students, right? Correct. It’s basically half and half, Tom. So half the money in higher ed, I’m rounding some now, are checks written directly from state governments to the two thirds of colleges that are public universities. It’s, let’s call it college side or supply side direct aid. The other half roughly is money the government gives to humans, students. It’s the Pell Grant, and it’s the direct federal loans. That money goes into students’ back pockets. They can only spend it on accredited colleges, but they are choosing with the benefit of that subsidy. So that’s sort of the even split in higher ed. In sharp contrast to K-12, Tom, where all the money goes to the supply side.

Why has college become so expensive and worse as it gets more expensive, worse, meaning less relevant, less coherent, often less supportive of the learners that need it most? How do you think about that? I’ll tell the answer, Tom, and just to layer in with you, I’ll be even more sort of blue collar, let’s say, about why it’s getting worse. Like, people don’t graduate, period. So sure, it’s less relevant. It’s less supportive, but like, very few Americans understand that half the college kids out there, round numbers, will not get a degree. That 80% of students who start in a community college will not get a degree. Very few Americans know just how pricey it’s gotten, depending on how you measure it.

It’s been growing at 4% to 6% a year, every year, for over 30 years. That’s an anomaly. That’s not supposed to happen in a functioning economy of any kind. And Americans would also be shocked to know in how many instances, the thing that happens to you right after, namely trying to get a job, isn’t really a productive outcome given how much you paid to go to the college in the first place. So yes, I agree, first of all, it’s pricey, Tom, it doesn’t result often enough in a meaningful jobs outcome, and the graduation rates are really low. So those are the symptoms. And to me, the reason we get there is this, you know, you set up a system where there’s 4,000 colleges now, there were roughly 4,000 of them 40 years ago, and the government starts to pay for it very, very heavily. You don’t let any new entrants come in to innovate. And you don’t really close any of the colleges and put pressure on them.

So in an environment like that, in a sector design like that, where the government is sort of paying for it, and you have incumbents that are totally protected from competition and from accountability, I’m not surprised that prices go up, the quality goes down, and that innovation stalls. I’ll tell you that the diagnosis, I’m not forwarding time, if you notice, is not about school design. I don’t think that’s the deficit. I think they’re amazing, bright people. I’m talking to one of them in Tom VanDark right now, full of ideas about how to design a college. That’s not what keeps me up at night. What keeps me up at night is giving a well regulated pathway into the sector for innovation, where we can get new designs while still protecting consumers. That I think is really the nuanced goal of public policy, tightly regulated innovation. For the last couple of weeks, I’ve been wrestling with this idea of accreditation, because I agree that the accreditation process, particularly in higher education, is really broken and damaging and limiting entrants. Two examples that come to mind are friend Dennis Littke, who started Big Picture, tried to start college unbound, and I think his journey towards accreditation took him more than five years, and here’s a guy who wants to serve working adults with some credit, arguably the people that most in society need help with finishing a degree and finding affordable pathways to high wage employment.

Dennis would tell you he said we had no last night and said it just had been a nightmare. Then our friend Ben Nelson, who started Minerva. This is on the other side of the spectrum, a venture-back startup with a highly designed learning model. I think it took Ben five or six years to gain his own accreditation. He had to do a piggyback startup to gain entrance. Those are two examples of how accreditation keeps really smart, well-intentioned people trying to serve specific audiences out of the business. I mean, you’re preaching the choir. You’re describing Ben and Dennis. These are super, super resilient people, and they’re the exceptions that generally prove the rule. Based on the data we have, Tom, there have been, if you added up to students who go to colleges that have been newly created in the last 20 years, it’s less than 2% of the college sector. Every once in a while, a superhuman like Dennis or Ben will creep through. It does take 10 years. Let me contrast that with the stat that I just heard last week that a third of US public school students in K-12 are going to schools new since I met you.

Absolutely. But just to build on this, Tom, remember 50 years ago, I think there were four million kids in American higher ed. I lost track of the number now. It’s close to 20 million now. The institution number hasn’t changed. So it’s a fixed number of providers in a rapidly expanding sector over the last several decades. Now, the one thing I’ll say in defense of the accreditors is this, Tom, they have an awesome power, which is to stamp an institution as fit to accept these very, very generous public subsidies. So when I do think accreditors should get much better, more serious, more competent about approving, really sort of clever, well run college startups run by nonprofits.

But it can go horribly wrong. The for profit movement, there was a period a couple of decades ago where there were lots of startups approved and it went poorly. So it’s a, accreditors do have an enormous and serious task when they approve a new college because the moment you become an accredited one, you can access these very generous subsidies. And so it has to be done very strictly, but it should be done because we need new institutions in the innovate. The thing people often overlook also, Tom, is how well intentioned people in incumbent colleges are incredibly constrained in their ability to innovate because they’re, they have fixed costs, they have fixed staff, they have fixed routines. So it’s like any large, old organization will struggle a lot to totally reinvent themselves.

So if the college of the future needs to cost a lot less and massively outperform, it’s almost a guarantee to me that you need startup teams to run at that. And so all the way back, we come to accreditation. There’s got to be a way in for these tightly regulated nonprofits that can come in and seek new ideas. What kind of new institutions do you imagine could be, would be started if there was an innovation pathway? Yeah. So again, I have lots of opinions about the college that I would run. And I’ll sort of share that. But the honest, and you might find this dodgy Tom answer is that from a policy standpoint, the ideal, let’s call it nonprofit startup college accreditor to me,

would be very neutral on design and merciless on outcomes. So the ideal accreditor to me would be one that says, okay, Tom, you and your friends want to start a college and I’m of course going to scrutinize your design for plausibility and sort of basic reasonableness. But where I’m going to be uncompromising, and you’re going to hear an echo of this from K 12 is I’m going to look at your ability on a value added basis to improve graduation and job placement rates. So in other words, we need to get public funding towards outcome regulation with lots of sort of measured innovation around design. So now all that being said, Tom, if I had to predict where the optimal designs are, of course, they take advantage of technologies, because they’re exploding all around us, you write about it every single day.

Of course, they’re focused on employer connections and producing the economic outcome that all college students almost all college students want. But after that time, I think by region by subgroup of students by geography, a quite large variety of designs will grow up. And I also think this is when employers can really these clever startups will find new and very productive ways to connect to employers. And I can imagine a whole bunch of colleges growing up that are fairly specialized around degree fields and programs that are very tightly coupled with job openings. Just the last thing I’ll say, Tom, is that there’s so much uncertainty in the labor market. Now, where are the jobs of the future?

You know, you can find the 10 brightest people on the planet know barely be able to tell you where the jobs are two weeks from now, or two years from now. And I think it’s essentially impossible to predict where the jobs are 10 years from now. So I think the only sensible policy response on the college side is to get agility into the sector. We literally need colleges that can adapt at lightning speed. We don’t have them now by any reasonable measure. They’re very, very conservative in flexible institutions.

Do you anticipate that a group of philanthropies would step into this space and help support development and scaling of new institutions? Yes, I do. I do absolutely. I, I, you know, to have the existence proof yet Tom, because there is no nonprofit startup movement in higher ed. But seen from afar, these are functioning solvent institutions over time. So let’s say you and I went off to start a new community college. Right. And we said, look, we’re going to sign up via this new accreditor to deliver measurable, transparent, provable results on completion rates and on jobs outcomes.

And here’s our design. And we’re going to run it at a cost level where students can pay between their access to Pell, some reasonable, boring, some savings. There’s an economic model there that works over time. It needs startup capital, but it does reach self sufficiency. And this is a, so as a result, back to your question, Tom, it’s a perfect, perfect grant making opportunity because it pays back. It has a, when the charter schools did well, they accepted philanthropy during a growth phase to iron out the kinks and then eventually became self sufficient.

And this would have echoes of that from a standpoint of a donor or philanthropy. Stig, I think you would prefer to see this be limited to nonprofit organization. Is that right? What about venture back startup stepping into this space? How do you feel about that? Yeah. So the first thing I’ll say is, you know, I grew up a capitalist. I have enormous faith in the profit motive. I think it’s done a great deal on this planet.

And the private capital markets can be incredibly powerful. But I am not in favor of for profit privately owned colleges where excess capital can be distributed back to owners. I’m not for it. And it’s for very, there are a variety of reasons for that time. Some of it is just the practical politics of this. It’s hard enough to talk the higher establishment into the idea that we should let in new startups that are run by social entrepreneurs and are run not for profit. The moment you say they’re also going to be owned by capital and can distribute excess capital, I think just the politics of this breakdown totally.

Beyond that, I think there is a unique regulatory problem in with the for profit college because in an environment that’s so vulnerable actually to competition, you can imagine immensely profitable colleges and where people can actually get in the short run immensely rich. And I think that’s, I think that’s unattractive to me like imagine what the private worth of Southern New Hampshire, Arizona State University would be right now. And I think it becomes sort of untenable from a policy and political and popular standpoint. So, the other thing I’ll say I think there’s an enormous supply of social entrepreneurs nonprofit entrepreneurs who are willing to run colleges who are really clever they come out of all kinds of workforce nonprofits education oriented nonprofits and there’s a lot of startup capital from philanthropies. So I think we can make a lot of progress without having to take on the for profit problem. I’d like to explore potential unintended consequences that some of your critics might raise.

Is it likely that in this innovation space, we’d see what Ryan Craig might call it bunch of heart sprints to a good first job job training programs that would be super efficient at taking high school students and putting them into into family wage employment. Over time, as more and more of the sector would move into the job training space that we would lose a general education and education for citizenship. So what what happens to that identity development citizenship development in this in this new world. Yep. I’m going to give you my really heartfelt but slightly obtuse answer to this which is that the world that I imagine and hope for Tom with these new arrivals and these new startups because it’s neutral on design and really strong on outcomes. There’s lots of space there for designs that take an interest in things other than or in addition to let’s say the two things I think we’re obligated to regulate for on behalf of the public.

So here’s what I mean by that. If I ran this accreditor one constituency would be the taxpayer in the public and I would say in order for this new college to accept public funding it has to as a minimum demonstrate graduation rates and some kind of short term economic return to the student. I don’t think any student would ever be against that. Separately, these colleges have but we very free time to design for character development saw skills. They can be lots of liberal arts designs in the mix. And I think what the accreditor and public policy should say there is just report openly to parents.

There’s a very there’s an enormous heterogeneity of preferences and college students. They have lots of interest in all kinds of designs and colleges, and they choose very actively. So I think a lot of that gets solved for I’m not interested in anointing a winning design of any kind. I can get quite nervous myself about really jobs wearing short term designs personally, though I think many students crave them. So the short version my my response to Ryan would be good public policy in this area would allow for both us regulating new colleges so they produce a return on the public funding in these colleges and the former graduation rates and jobs outcomes.

And at the same time Tom, lots of diversity and designs that would be driven by student choice. Who makes this decision who would authorize a new crop of authorizes is this in the next higher education act. I know so there is a little unclear. There’s almost no precedent for new accreditors arising. You know, sort of a once in a decade once in 20 year event.

There’s a regulatory pathway in the education department. Big big picture Tom the authority, the an accreditor needs to be recognized by the education department, essentially, and then also by a body called the Seekie, which is a kind of body that oversees all of the accreditors so it’s DC regulatory and administrative decision making to stand to get a new accreditor created. Or several to your point and just for context there for the listeners Tom they’re about, you know, they’re a, they’re a 40 or so of them in America right now and about 10 of them really rounding a lot account for almost all of their accreditation in the country. It’s this an innovative solution to to a big tough problem, but I am a big fan of the innovation spaces and zones that have been created in K 12 they feel like they’re a good precedent for how we might use this sort of outcome focused. Authorizing and do it in a way that would both create a new crop of institutions while maintaining federal support for via student loans.

Yeah, and more at Tom. So the kind of the argument that I’m making is that we need a small number of startups, nonprofit startups into the college space to demonstrate what’s possible to seek totally new breakthrough designs. At the same time, there is a kind of, there is a set of incumbent institutions there many of which are capable of transformation, especially if their shoulder to shoulder with startups that can uncover refine and scale new designs. And those institutions remain uncontested in their funding under the scheme that I’m describing because you know they’re the beneficiaries of enormous sums of state level aid directly to colleges. Remember, those are the two in the four year public universities, they get massive sums of money from state legislatures that will be untouched by a new accreditor for private college or nonprofit one. And then the federal money, the loans and the Pell grants those are administered by students and so they’re still running right to the two and the incumbent colleges.

So it’s more about just getting some fresh teams and some fresh attempts at the problem into the sector. I think that will trigger even a response among the incumbents I think we’re talking to the secret actually from college one to one about an innovative approach to attacking the challenges of higher education. I’d like to finish with a segment we call one to one. The first one is I’d love, I’d love to know who over the last year while you were investigating this was most influential and you’re thinking who opened who created to help you create a new mental model of both the problem and the solution. I think Paula block at Southern New Hampshire has probably been the most influential person in my thinking and higher ed, and he straddles all the issues we’ve been talking about Tom I mean he is on the one hand he runs one of the largest incumbent institutions.

And at the same time he’s innovative and pushing the boundaries of that institution and I think a truly open minded person on these issues of getting new ideas in and putting productive pressure and innovation on the status quo. So I think Paul Paul is probably top of my list. We’ve had to fall on one through twice and we’re big fans of his work. I totally appreciate that he did a sabbatical and went and spent it at the Department of Education. Maybe there’s a Department of Education sabbatical for stick Leslie in the future.

All right, I want to try to, I want to try to summarize two insights that I’ve drawn from our conversation and I’ll invite you to ask at a third one. So the insights that I’ve drawn from our correspondence our conversation today one is they have to see systems. Higher ed is a big complicated system that we’ve inherited and a lot of the incumbents professors college heads just take as a given the way things work. And I appreciate that you’re that you’ve poked around in enough in the system that you you’ve separated things that are artifacts that have just been inherited that could as easily be work a different way. And that you have imagined a new way forward that protects the interest of the people involved in the system.

So seeing systems and number two, a pathway thinking. I’ve seen you at match charter school and now in your new work thinking hard about pathways for young people that are connected and relevant and affordable and accessible and so that pathway thinking I think is a really important insight. Is there another one that you would add to that, maybe a sibling idea Tom which is the extraordinary power of entrepreneurship. In this case nonprofit social entrepreneurship, the ability of fresh teams, clever teams freed from fixed assets, fixed resources, old routines to go at a new problem. I have lots of faith in that and I think a little bit of nonprofit tightly regulated startup activity inside the college sector could really surprise us about how much a college can do and how affordable it can be. And I think that would be a benefit to everybody in the sector, if we could get some entrepreneurial nonprofit startups in so the power of entrepreneurship Tom which has been sort of in one way or another, my work for many, many decades.

We’ve been talking to my friend Stig Lesley he’s the CEO and founder of college one on one. He’s an imagining a new innovation space that will allow new institutions to revitalize American and then I think global higher education. Thanks for joining us today Stig. Thank you Tom. Great to be here. I want to thank our music making bread making poet laureate and producer Maitreyn Pasha for making the show possible along with his getting smart colleagues. Until next week keep learning and keep innovating for equity. Thanks for tuning into the getting smart podcast today. We want this podcast to be actionable and insightful and a great way to learn about what’s next in learning.

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