On the Death of Borders

Scott Leslie asked me a great question a year ago that I never forgot. In the middle of a discussion about the decline of newspapers and it’s relation to the impending implosion of higher ed he asked me, since I was defending institutional relevance, to name one case where an entrenched industry made changes and avoided the hammer of fate. 

I think I may have replied that industries don’t dodge the bullet (players within industries do), but even then I was pretty hard pressed to come up with a compelling example of a true evolution in the face of something like the Internet.

I think we might have one now. Borders is closing all around the country. It’s bankrupt and it is done. 

While that might seem pretty counter to my claim, the point is that it signals to some extent the End of Days for the 80s/90s style bookstore chain is here. And yet Barnes and Noble is still around, to some extent, because of their embrace of the technologies Borders saw more or less as their enemy. 

Commenting on Borders’ farewell note, Ian Crouch writes:

Borders, of course, isn’t going to say that the book trade is fine and sound and that it simply blew it. Yet setting the “eReader revolution” alongside a “turbulent economy,” and branding it an “external force,” reveals a decade-long blind spot that goes some distance in explaining how Borders got to this point. It’s been said widely, but can stand repeating: e-readers and digital content are not part of some tidal force bent on destroying all that is fine and good about the written word. It is just another way for customers to buy books, for companies to sell them, and for people to read them. The recession has been tough on all booksellers (Barnes & Noble’s tight spot last year brought on many of the same reflections about the state of book retail) but the growth of digital reading has not been equally hard on everyone. Short of changing its name to Kindle, Amazon has done just about everything it can to promote its e-reader; Barnes & Noble has doggedly pushed the Nook. Borders, meanwhile, owned just over ten per cent of the Kobo e-reader, and gave the device prominent placement in its stores, but never managed to make a clear connection in customers’ minds. (B&N has since shored itself up enough that commentators were suggesting it as a likely tennant in many of the soon-to-be abandoned Borders locations.) The Detroit Free Press gets it right this morning by noting that the company lost “a battle with competitors, technology and itself.”

In he long run, I suppose, there will be no bookstores, but as I believe Keynes first said, in the long run we’re all dead. Short to middle run is what matters in terms of shaping the world and (hopefully) making it better. And in the short to middle term there are major, major differences between how institutions go about their business. The ones that, like Borders, understand Just-in-time learning, peer-to-peer networks, and open content as “external forces” are headed for dismal declines. The ones that see these things as just more ways of doing the stuff we have always been about will be OK (or at least more OK).

Maybe Barnes and Noble will be under in five years, maybe Random State College will be under in ten. I don’t think any industry should desire to live forever in its current form. In the meantime, differences matter, and the institutions that adapt get to write the next page of history.

What if broadband DOESN’T eat everything?

From A.V. Club:

The sky is still up and water is still wet, but the truism that the music industry is circling the drain appears—at least for now—to be reversing itself ever-so-slightly. Consequence Of Sound gathers the evidence, beginning with a story from Exclaim noting that album sales in North America are up for the first time since 2004. It might only be a 1 percent increase from last year—which is around 2 million albums, or roughly the sales of Adele’s year-leading 21—but it’s still an increase.

Also, music sales overall are up 8.5 percent from 2010, with digital tracks up 11 percent, digital albums up 19 percent, and vinyl albums up a truly impressive 41 percent. (Both Fleet Foxes’Helplessness Blues and The Beatles’ Abbey Road have sold 20,000 vinyl copies this year.)

I’m not naive enough to say that the 90s are on their way back, or that the record industry won’t look radically different in a decade. 

But it’s interesting — we’ve used the record industry as an example of what lies in store for higher education as we face ubiquitous broadband — years of hubris followed by exponential decline into irrelevance.

But life turns out to not be so tidy. If it was worth pointing to the record industry as an example before, it might also be worth thinking about the ways that trajectory has surprised us. 

The Great Threat to Higher Education is Medical Costs, Not Bubbles

To be clear about my last post, there are some catastrophic economics of higher education down the pike; they just aren’t bubbles.

The biggest one? Rising health costs for seniors and the disabled. As health care takes bigger and bigger chunks out of the GDP it is going to crowd out spending on a lot of things, and education is going to be one of the places hardest hit. As Kane and Orzag’s excellent paper predicted in 2003:

Curiously, the biggest challenge casting a shadow on public higher education’s future—the Medicaid program—is not yet on the agenda for most university administrators. The evidence suggests that rapid growth in state Medicaid obligations over the past few decades has crowded out public higher education expenditures, and state Medicaid obligations are expected to continue to grow rapidly over the coming decades. As a result, state support for public higher education is likely to come under increasing pressure, even as state revenues recover. Because roughly three-quarters of all college students in the United States attend public institutions, the implications for the nation’s higher education system are potentially profound.

They go on to calculate that each dollar of Medicaid spending reduces state expenditures on education between six and seven cents. And there is a lot more Medicaid spending on the way.

Incidentally, I’ve seen these problems discussed in literature on European systems as well; they are not problems unique to the U.S. Everybody aware of the coming wave fears it. 

The U.S. has a couple drivers though that make the situation particularly grim — the biggest probably being that U.S. health costs are increasing at a much faster rate, but another factor being that state Medicaid dollars are matched federally, where as state university system dollars are not, which creates an insurmountable pressure to cut education first at the state level.

In any case, I laugh at bubbles. Crowding out, on the other hand, scares me to death.

The “Tuition Bubble” and Degree Oversupply

There’s a lot of neat stuff in Carnevale and Rose’s The Undereducated American  (and if you can’t read the whole thing, the first ten or so pages are essentially a Powerpoint of the findings — they will take you all of two minutes to flip through; you have no excuse).

One of my favorite pieces is on page 29, specifically this graph:

One of the arguments of those who claim we have a tuition bubble is that one in three graduates of college do not hold jobs that require a bachelor’s degree. If there really is such a demand for college graduates, the argument goes, then where are the jobs?

But requiring a degree and putting a premium on a degree are two separate things. If we believe the market is rational in this case then this figure

…indicates just the opposite. It shows the median earnings of full-time, full-year workers in the occupational tiers for those with only a high school diploma and those with a Bachelor’s degree [in those professions where a Bachelor’s degree is not required]. Within each occupational tier, those with Bachelor’s degrees earn between 37 to 45 percent more than those with only high school diplomas.

In other words, employers place a premium on college degrees, even in the lower and middle-skilled jobs that don’t technically require such credentials.

There’s certainly questions about what happens to this gap when you control for a variety of factors — how much of this holds when you control for race, or education level of parents? How does it look comparing within jobs at a more granular level?

But I think at this point the onus is on the Tuition Bubblers to ante up.

U.S. says colleges with big tuition hikes must explain

U.S. says colleges with big tuition hikes must explain

This is almost sadly funny. So there’s all these tuition hikes, particularly at state colleges. It’s out-of-control spending, right? So the DoEd is asking colleges that have the sharpest hikes to explain why they are being so profligate with money.

Except, as everyone knows who actually works at a state college in America, the reason why costs are going up has almost nothing to do with spending. The reason costs are going up is that the state legislatures are cutting the funding to colleges. By a lot. Add in the fact that financial need has gone up as well, and well, that’s pretty much your increase right there.

I guess I’m not opposed to this policy — I’m sure even in the current climate there are colleges that are clearly feathering their nests at the expense of students. And going forward, I am sure it will be useful.

Still, it feels oddly out of touch at this particular moment.

Plan to Restructure British Higher Ed

Plan to Restructure British Higher Ed

I wish I knew more about the British educational system to say for sure, but this sure looks like the voucher slide to me:

Willetts, the universities and science minister, said the “conceptual shift” was that the whole framework of regulation needed to focus on “the student in receipt of the loan, rather than a group of institutions in receipt of [a government] grant.” He said: “You have to think of a regulator protecting students as consumers, ensuring they have access to what is still a very significant amount of public money and being clear about what happens in return.”

If our experience in America is any guide, the “competition” that this plan will foster will have zero to do with quality of instruction, and everything to do with amenities and co-curriculum. And then, a decade later, all the conservatives that supported consumer-driven education will sit around and shake their heads gravely, wondering how college turned into a five-year party. It will never be that they handed out vouchers to 17-year olds, though, because markets are smart.

But I really don’t know the British system, and maybe I am misreading this. If anyone wants to explain the system to me (and others) please do…

U.S. College Tuition Rises 4.6%, Beating Inflation

U.S. College Tuition Rises 4.6%, Beating Inflation

It pays to read these things carefully. Tuition at private non-profit colleges increased at 4.6%, but adjusted for inflation this was a 1% increase, one of the smallest in the past 40 years. And again, these are published prices: student aid is up 7% which means this is less a story about spiraling college costs, and more a story about private colleges using increased price discrimination. Which could be a fascinating story, if we cared to dig into it.

Incidentally, for those unused to Tumblr, you click the title to get to the story I’m talking about. Yeah, took me a minute too…