 Welcome to the Mises Academy podcast. I'm Danny Sanchez, Director of Online Learning at the Mises Institute. For this episode I interviewed Peter Klein, Executive Director and Carl Manger Research Fellow at the Mises Institute about his Lou Rockwell.com article, Universities to MOOCs. We will assimilate you. Universities used to have in the medieval era a certain independence from the state that they were granted charters that gave them certain rights and they were protected by the church which during the Middle Ages was separate, was rivalrous with the state. But later the universities were assimilated and you had things like ministries of worship and instruction and the intellectual bodyguard of the Hohenzollern like we talked about before. In your article you talked about the state through its university appendages may try to assimilate the MOOCs and other alternative education offers. Do you see that happening? Do you see them being successful in that? And if they can't assimilate, if they can't join them, will they kill them? If they can't assimilate them, will they crack down on them? Yeah, that's an interesting sort of case study of the kind of general principles that we're talking about. So the ability to deliver courses at a distance, of course we've had that for decades, so-called correspondence courses, but then with the rise of the internet and streaming audio and video and so forth, it seems pretty obvious that you can have a learned individual and expert communicating knowledge or facilitating a conversation among a large group of, smaller large group of students without all being physically present in the same room. You can do it through video conferencing and audio conferencing and you can send them the articles as electronic documents, they can read e-books and so forth. So when these technologies first became available, they were adopted by the new entrants. The for-profit vocational schools were much quicker to adopt these kinds of distance learning technologies, online learning technologies than the privileged incumbents, but the incumbents saw the writing on the wall and they said, yeah, well, we need to offer distance learning courses too. What people call a MOOC. MOOC is just a distance learning course with lots and lots of students and typically open enrollment, so one doesn't have to be admitted to MIT to take a MOOC that's offered by MIT. You just go to a website and maybe you sign up or you just click and watch the video or whatever. MOOC standing for Massively Open Online Courses. Right, so it's an online course that is open to anybody who wants to take it and typically on a very large scale, hence the M for Massive. So there are a lot of private companies that provide MOOCs, sometimes on their own, sometimes in partnership with universities who supply the professors and the curricula and so forth. One of the things that I think has been fascinating is that the established universities, originally sort of slow to embrace the MOOC, are now starting to bring it on, are now starting to jump right into the fray and say, oh, yeah, yeah, of course, we're all about MOOCs. We think MOOCs are great. You shouldn't take it from a private company. You should take it from us and then you get our high quality. Essentially, this is a way of kind of co-opting the technology, of assimilating the technology as you said when you asked the question. But as I mentioned before, if you look at the history of technological innovation, it's been very, very difficult for incumbents to be successful in incorporating the new technology into their traditional business. The classic reference on this is a very influential business book by Clayton Christensen called The Innovator's Dilemma. Christensen introduced a concept that he called or popularized what he called disruptive innovation. And he pointed out that incumbents for a variety of reasons, because there's a lot of inertia. They already have a lot of established routines and procedures that have evolved to fit the old technology. They have an existing revenue stream from using the old model, which might be threatened by the introduction of the new model. It's generally easier to start with a blank sheet of paper and create kind of a new business model that uses the new technology. It's very, very hard for successful incumbents to switch from the old technology to the new or to, you know, embrace the new and parallel with the old. As I said before, we see this in, you know, transportation and manufacturing and most of the high tech sector. And everybody knows that if you look at digital music, right, when digital, the technology for MP3s and so forth came about, it wasn't the record companies that figured out a way to make money from selling digital music. They tried and failed completely. It was Apple, not a new company, but Apple was a new entrant into the digital music and media space. It was an outsider that figured out a way to successfully incorporate this new delivery method and storage method for playing songs. And of course now the record, the established record companies, they want to use that same technology. They want to put their song, distribute their songs through iTunes and so forth. But again, the universities today are in the same position as the record industry. And it just, it doesn't seem likely that they would be very good at incorporating the latest and greatest distance learning technology. Now the article that you mentioned that I wrote was playing off an article in Slate that referred specifically to what they call the flipped classroom model. So what they mean is the traditional model is the professor gives a lecture. The students listen to the lecture. Then they go home and they're in the lecture hall listening to the lecture. Then they go home and they do homework problems and write essays and those kind of, you know, small group activities on their own. Then they come back the next day. The professor gives another lecture in the classroom and so forth. The flipped model says, well, why not do those things in reverse? So if the professor can record the lecture onto a video, then the students can watch the video at home. And then when they come to the classroom, the professor can work with them on homework problems and different sorts of exercises and so forth. So it's, you know, flipping what you do in class versus what you do at home. Now, this is hardly a new model. This is a very well-known, you know, idea of making the best use of face-to-face time. And most studies show that we best retain information, not when we hear it in a lecture, but when we get it out of some kind of problem-solving technique or a Socratic dialogue, you know, discussion using the so-called Socratic method. So good college teachers have always known that you shouldn't spend all your time during class hours lecturing. That's not an effective way to teach. You should engage in Socratic dialogue or have interactive, you know, group activities and problem-solving and so forth. The idea with the MOOCs is, oh, well now it's easy to do that because all the lectures will be online and we'll just, you know, solve homework problems in class. The problem is teaching by giving a lecture contrary to what people often think is much, much easier than teaching through, you know, carefully structured interactive activities. Most faculty members in regular universities are not trained how to do anything other than give lectures. They're not very good at organized problem-solving sessions and if they're, you know, research scholars with PhDs, they're probably vastly overqualified for doing the kinds of things that, according to this flipped model, they should be doing. The idea is while the students watch the lectures and then, you know, famous Professor Smith helps them with their homework when they're in class. Okay, I mean, fine. If you want to use that model, that's great. But why on earth would they want to pay $100,000 for some homework tutoring sessions with Professor Smith? They can more easily get the homework tutoring online or from a much more effective and lower-cost provider. Yeah, it seems that it's such a waste when you have not only intellectuals of that caliber spending a lot of time doing... A lot of times they're really great at lecturing, but they're not necessarily great at helping students through problem sets and whatnot. And so that seems like a misallocation. But there's also a broader misallocation in terms of unappreciated teachers going all the way back to Johann Sebastian Bach when he was an instructor at the St. Thomas Church in Leipzig. I was reading up his biography and talking about how the students there had no idea what kind of a genius that they had trying to teach them and pulling his hair out, trying to get them to do their exercises. Same thing with Murray Rothbard at Brooklyn Polytechnic and UNLV. The students there had no idea what they had. So with these online courses, it seems that you have more of an opportunity for students who would really appreciate working with them to find them and for them to come together. That's right. I think we need to bring it back to this idea of the cartel that you mentioned before. Most of what established universities and university faculty are doing now about how to use MOOCs or how to restructure the classroom or whatever, ultimately it all comes down to protecting their current position, right? Universities don't want their funding cut and professors don't want to lose their jobs or have their salaries cut. That's ultimately what they're aiming at is how do we handle this new technology in a way that maintains our privileged position in society, etc. That's why this is such a threat. Again, if you go back to this idea of the MOOC or just video lectures more generally, let's say the subject is American history, 20th century American history. Under the current model, every college and every university has at least one, two, three, four professors with PhDs in American history who are teaching that intro to 20th century American history course and, you know, not necessarily living an extravagant lifestyle but making a pretty good living doing that job. Now we have the ability for students at every college and university, for students in every city and town to get that lecture, not from the professor on their campus, but from some professor somewhere out in cyberspace who happens to be the world's best lecturer, who can give a brilliant talk on some aspect of 20th century US history and who knows where this person is located and this person may or may not also be a famous researcher. This person may just be a great lecturer. What the professor in your hometown college doesn't want is his students getting that lecture from somebody else and notice how it scales up. I mean, if this person is really great and they're lecturing into a camera, 10 students, 100, 1,000, a million students can all watch the lecture and get a much better lecture than they would get from the local professor. Now, of course, there are some differences. There are some cases where you need somebody on site for more interactive things, but there are many cases where one professor who's really good at it can give that lecture in a way that's much more effective than having every professor do it. But you see, of course, that's a huge threat. If I'm a professor of American history, I don't want to lose my job to the MOOC just as, you know, I don't want to lose my factory job to a robot or whatever. I want to keep the robots out and I want to keep the MOOCs out. Or I want to incorporate the MOOCs as a supplement somehow. I just don't want them to be a substitute for me and for my job. That's why this model is so threatening to sort of the traditional structure. So what the universities have done is to say, oh, yeah, we're all about MOOCs. We're all about distance learning. But for example, if you're, say, you know, University of Wisconsin, just to pick a random example, they'll say things like, yes, now all of the professors at Wisconsin can give lectures into a webcam so that, you know, the teaming masses in Southeast Asia or in sub-Saharan Africa can now consume our professor's courses. Wow, isn't that great? Of course, you see that means no unemployment for University of Wisconsin professors. What they don't want is all of their students taking the lecture from some guy in India who happens to be better at giving the lecture than their own faculty. The universities see the MOOC as something that they're only interested in it if it can enhance their status position. They're not interested in it. They will fight it. They will resist it if it means a threat to their business model. Yeah, not everybody can teach math like Salman Khan, the founder of Khan Academy. And so his Khan Academy website has been used. It was one of the most prominent early uses of flipping because a lot of math teachers would use. They would have the students watch the Khan Academy videos at home and then do problem sets in the classroom. And so you have Khan as sort of like a rock star instructor and he's a celebrity instructor and is based on merit. And there was an article in the Wall Street Journal about Kim Ki Hoon in South Korea who earns $4 million a year as a rock star teacher that he's been teaching over 20 years in the country's private after-school tutoring academies. And so it seems that this is more getting towards what Adam Smith talked about. He talked about higher education and higher education in Oxford was especially bad because he said that teacher compensation wasn't tied at all to performance. Whereas in Scotland, a lot of the fees were paid, a lot of the payment was from student fees and student honor area. So do you see that as a really promising development? Well, it could be. It depends on how the structure of the higher education system, how it's changed, how these kinds of things we're discussing are played out. Most universities or in most universities there's a lot of discussion about compensation and sort of merit-based pay all revolving around problems of measurement. How do you measure research quality? Should it be based on the number of publications or the prestige of the publications or the number of citations? How do you measure teaching quality? Should it be based on student evaluations or something else? But you see all of those controversies, those discussions that you can read about in the Chronicle of Higher Education, the trade paper for the university sector, they all take place assuming that the existing structure of the university remains in place. If professors were freelancers, as in ancient Greece or something where they would sell their research output on a piece-by-piece basis or they would sell their lectures, then you wouldn't have to have a university committee that evaluates quality. You would let the market evaluate quality just as you're describing. And if somebody can attract thousands or millions of students to their MOOC, they would be compensated because the students are paying the professor without the middleman or with the middleman taking the smaller cut. Or in the case of Salman Khan where it's free but he gets so many donations from people like Bill Gates because of the big impact that he's having. Exactly. There are a number of different ways that performance, sorry, that compensation can be tied to performance. But it's much more difficult to do if you assume that everybody is an employee of a big university compensation committee that decides how people should be paid. Rather, if we have a system like the ones we're talking about that's more open where there's more competition, there's decentralization, there's fundamental restructuring, we might have something very, very different. But just as some artists don't like the fact that Thomas Kincaid can be a bazillionaire or people like Norman Rockwell and they don't like high quality art, quote, unquote. So the producers of self-described high quality art will poo-poo the market system. Say, no, no, of course that's why you need, you know, the national endowment for the arts should be doling out the money, not the market, because the market will choose the wrong stuff. It's the same argument that proponents of the market have heard a million times. You hear the exact same thing in Higher Ed. We have, I mean, the rock star professor, he's just a showman. We can't trust the students to know what kind of higher education they want. It has to be dictated to them by the elites. Well, I mean, the same arguments that we would use to rebut that line of reasoning for art or for automobiles or anything else would apply with equal force to higher education. Thank you.