On May 10th, CUCFA President Robert Meister sent the following open letter to Coursera founder Daphne Koller:

Can Venture Capital Deliver on the Promise of the Public University?

An Open Letter to Daphne Koller,
Co-Founder and Co-President of Coursera and Professor of Computer Science at Stanford University

Dear Professor Koller,

Because I share your vision of creating a world in which all have access to an excellent and empowering education, I would like to propose a new online course for you to make freely available through the Coursera platform. Its title is “The Implications of Coursera’s For-Profit Business Model for Global Public Education.”

The goal of the course will be for the students enrolled in it to understand the real relation between Coursera’s visionary mission—“to offer courses, in partnership with the worlds’ top universities, to everyone for free”—and the logic of the strategic business plan that led Coursera to be named “The Best Startup of 2012” by TechCrunch last January.

You and your company’s compelling pitch to consumers suggests that the private sector–that is, venture capitalists and not taxpayers–can deliver a more equal world in which income will be based on the skills and knowledge people actually acquire rather than the artificial scarcity of credentials for which they are eligible and can afford to pay. It is natural to hope that in this more equal, and also more productive, world incomes could rise for everyone willing to acquire the necessary academic knowledge and take the tests to prove it. This, in fact, was exactly what was promised by the original California Master Plan for Higher Education using taxpayers’ money when it was adopted in 1960.

My proposed Coursera course will ask students to discover for themselves how and why John Doerr, and your other Venture Capitalists, are willing to provide an even greater abundance of knowledge in the service of greater economic and social equality than is the State of California, which clearly has the means to spend much more than it has cost your company to reach a worldwide enrollment in the millions.

As the course progresses, my more diligent students will come to see, however, that reducing income gaps through education is not the main problem that Coursera and other Massive Open Online Course (MOOC) providers are trying to solve in their pitch to investors. That problem is, rather, how and when to price the content that you are now giving away in your current (pre-public offering) phase of development.

Using Coursera’s model of dividing my planned lessons into 12-minute “chunks,” I will help students see for themselves why its courses can’t presently be priced for much more than the $50 a few of students are willing to pay for “certificates of completion.” The reason is that free MOOCs weaken the link between scarcity and quality on which the business model of all higher education, both public and private, unfortunately depends. By doing this you open a potential market for mass higher education that is much larger than that of public universities, but you also threaten the ability of those universities to charge as much as they do now for keeping high quality credentials relatively scarce. What price points in higher education can you take as the baseline for monetizing your product when, as you often say, online courses can scale up from hundreds of students to millions at “near-zero marginal cost”?

The next lesson module would show my students how Coursera and its competitors might try to solve the pricing problem on their own through years of costly experimentation in building their own “brands.” Your interactive platform is ideal for allowing students to test the possibility of making access to particular MOOCs artificially selective in order to see how much people are willing to pay for this or that made-up credential. Students would quickly come to see that without legitimation of their credential by state government, the existing price points you could use for calibrating your educational products would be those of current for-profit higher education industry, which already has trouble establishing that its offerings are worth what students pay. You could probably pay some of them to say that your courses are equivalent to theirs (plus or minus an allowance for the convenience/inconvenience of having to show up). But, financially speaking, this would amount to licensing your courseware to them or buying their existing customer base at a discount.

My students would soon see that a quicker and surer solution to your pricing problem is to peg yourselves to public colleges and universities, such as UC, CSU and the California Community Colleges. These are no longer free and accessible as most MOOCs now are, and they provide three elements for a successful business model that the MOOCs now lack:

• An access spread (based on their level of selectivity)
• A price spread (based on their tuition)
• A brand spread (based on their overall reputation and that of particular programs)
• An expected value spread (based on their anticipated effect on future earning)

My pedagogical aim at this point in the course is to help students think financially about the socio-economic spreads created by our public educational system as a potential source of private profit. The first step is to break spreads down into rank orderings and the size of gaps between ranks. This type of thinking already allows businesses selling educational services (such as standardized test preparation or student loans) to identify which students have the opportunity to jump up, say, two ranks in a given scale, such as brand or expected income, by overcoming only one gap in another scale, such as higher SAT scores or higher tuition payments.

Such products, unlike yours, are not directly educational. But they do help students think of education as a matter of arbitraging among the choices available to them— or in, marketing terms, “becoming better choosers in an uncertain and unequal world,” which means becoming potential customersfor products that provide them with options for greater mobility among jobs, cities, countries and so forth.

The best students in my course would instantly grasp the business opportunity created for MOOCs, such as Coursera, to harvest the economic value pent up in the data generated by U.S. public higher education by adding to the spreads I just described a new, and potentially global, database of ranks and gaps based on their capacity for nearly-continuous testing of student performance online. These performance records could be compared with those of students in a public university system without your students needing to be in that system.

Eventually, all students in my Coursera class will learn that data that they now provide to the company for free—perhaps so that it can grade them—will be the private property of Coursera, which can then sell it back to them in the form of “services,” which could include their own performance record but also different “views” comparing it with that of students at better universities, those with higher test scores and with advanced degrees. The possibilities for renting this information back to its students are endless, not to mention the added possibility of developing other markets for the user-assessment information that Coursera will “own.”

My students will thus come to understand that the for-profit logic of their online educational empowerment depends on the fact while they are consuming information, they are also producing information that Coursera can correlate with other data to predict what prices students with particular profiles would eventually pay for courses they are presently consuming for free. Coursera’s big idea, as you have described it, is that assessment every 12-15 minutes helps students learn. This model of user-interaction is similar to that of Linked-In when it was free—that is, before it went public in the corporate sense. Today, users of Linked-In can still perform searches on other people for free; but they must pay for access to the database on who has searched for them. From such comparisons my students will learn that there’s potentially a lot of money to be made if you can first “grow” your database by giving content away and then “rent” it back to a variety of customers including those who provided the data in return for seemingly free use of the platform that collects it.

How, my students will ask, could such a scheme possibly fail? They will learn that the foremost obstacle to immense profitability for Coursera’s investors is establishing the equivalence of the certificates of course completion that you now offer with academic credit that has an already-established price-for-quality. And they will need someone such as the taxpayer to continue to maintain an educational system of high enough quality and high enough price so that there is a global market for Coursera’s claim to provide something nearly equivalent for less.

Here they will get a lesson in politics because, fortunately for Coursera, there are now five bills pending in Sacramento that would require (in various ways) that UC, CSU and state community colleges give “full academic credit” for online courses that are “equivalent” to their own. By performing this service for MOOCs, state government would rationalize its decision to maintain the ranking (brand) of its public universities and colleges while restricting access and raising tuition. This means that such legislation is likely to pass in some form.

But Coursera’s long-term financial future is subject to political risk because the legislative climate can change. Right now it is in your favor because of the publicity generated in this early (too-good-to-be-true) phase of your development. Maybe the publicity will be less favorable as educational outcomes are studied based on measures of success that do not take MOOCs themselves as the standard for evaluating ordinary courses. I’m pleased, for example, that my proposed Coursera course will be able to measure better than I can in “live” performance how well students have paid attention to my words. But I will also miss finding out what interesting thoughts students had while listening to me—and afterwards—that were provoked by what I said, but may have led them to tune out. That, too, is part of higher education.

If some students think we should go slow on MOOCs until we better understand their optimal use in university instruction, I’ll have the opportunity to teach them some important lessons about the role of money in politics. They will learn that the governor is certainly involved in rushing MOOC legislation through as are (almost certainly) the kinds of venture capitalists who are backing Coursera.

Here I’ll take advantage of the opportunity Coursera provides for linking students to the venture capital higher education blogs. From these they will learn that, if any major public university system, such as California’s, is required as a matter of law to grant equivalent academic credit for a MOOC, your problem of how to monetize enrollment and credit in a course will have been solved. So, ultimately, the success of Coursera depends on your personal skill in producing a favorable climate of opinion that will allow the money in politics to do its work behind closed doors.

Students attuned to possibilities for start-ups that this political solution offers should be forgiven if their minds begin to race at this point in the course. There can now be virtual UC degrees, made up of MOOCs (or private-label counterparts) in which the bundlers charge “tuition” for certifying that its virtual “student” would have qualified by the numbers for UC admission and that the courses are equivalent to those for which UC will be required by state law to offer credit. And then there will be unbundlers who can charge “tuition” for comparing a student’s performance in a MOOC with those of UC students who are taking the equivalent course for a degree. At this point the job of a public university will be to maintain its ranking and raise its price so that the MOOCs and their bundlers can profitably market its “brand” to a wider world.

And what a world my Coursera course on Coursera will open up to your students! Your presentations here and elsewhere celebrate the hundreds of millions of potential students in India and Africa who have no access to a UC and Stanford “quality” education, and can now get it for free through Coursera. This is indeed quite wonderful. With the addition of my course, they will also be able to see how that “free” knowledge is not for the sake of more equality but the entering wedge for enormous corporate profits that are likely to increase inequality still further and to reduce the eventual economic value of the career options that they are seeking online.

Students in my course will also realize that the business logic of “for free” is that, once all the students of the world can get an “equivalent” education, Coursera will be able to set a price for it. And that price will likely turn out to be much more than the world’s students currently pay for the for-profit training institutions that line the streets in the emerging markets. Coursera’s potential success in capturing “millions of students rather than hundreds” through its presently “free” course offerings will very likely remove from availability for expenditure in the domestic economy a significant share of the trillions of dollars the people of the earth are now willing to spend on education. (Isn’t that what you mean by saying that India will no longer need to build new universities to meet the high demand for places from applicants who could easily get U.S.-quality instruction online?)

If my course is as successful as I hope, you may soon be approached by satisfied students who ask you the following questions: Will you and Coursera’s co-founder, Andrew Ng, be able to resist the pressure from your investors to charge more than zero for educational products that can be dynamically priced in changing markets? Will you reinvest to achieve more global educational and social equality the hundreds of billions that you have shown can be made by your ability to measure student performance in a form that can be correlated with college admission standards, income gaps, and university rankings around the world? Will you eventually teach students the difference between seeing education as the ability to arbitrage successfully among immediate choices and the many other forms of sustained thought that may be harder to measure than what can be measured after 12 minute chunks of attention? Could you envision a “capstone” course that helps students become more reflective about the limited conception of education-as-arbitrage at which Coursera excels?

A few students in my course may come to ask you and then ask themselves the large general question that their successful analysis of Coursera’s business logic implies: Should the public be willing to pay Coursera’s for-profit, market price for academic content, just as it does for the cable TV services that have replaced the public airwaves? Isn’t this another version of the question of whether the internet itself is really “public” when it ceases to be free?

You will give them your answer. When they ask me, I will say: I want to keep public higher education public in a sense for-profit content disseminated on the internet is not. A large part of Coursera’s appeal lies in your own nearly-socialist vision of an informational Common to which access should no longer be restricted based on the scarcity of places at existing universities and colleges. I personally wish that this part of your vision were coming from the leaders of UC. Instead they are trying to sell students on paying higher tuition because of the demonstrated role of elite universities in generating income inequality while also persuading the legislature to increase “access” so we can generate even more revenue from the tuition we charge.

Here I agree with your and Coursera’s business logic’s implicit criticism of public higher education. Public education has all but lost sight of its egalitarian mission while raising its prices at three times the rate of inflation.

I disagree, however, with Coursera’s implicit claim that privately-financed MOOCs can fulfill the promise once made, and now abandoned, by public systems to be an engine for reducing social and economic hierarchy. The educational Commons you propose is one in which the private owners of instructional platforms like Coursera will appropriate without exchange profitable information that can eventually be used to determine how much rent can be charged for access to the “Common” based on our personal, demographic, academic, and income profiles. (For this purpose you could correlate our unique user identity and online performance with other databases in existence or yet to be developed.) The free educational “Common” that Coursera’s business model promises is already programmed to be enclosed as private property. Your eventual entry fee can be dynamically priced (like airline tickets) to reflect the changing levels of student optimism or desperation about the future on which your long-term marketing strategy relies.

The question is not whether we who teach in public higher education can or should resist the creation of a truly “free” informational Common, but whether we can keep education as a necessary knowledge commons public in innovative, egalitarian ways that run counter to what you and your rivals are planning and doing.

I do not mean subjecting that commons to direct control by a state government that has already been captured by those who want to give away to private companies the remaining value of the public system that we still have.

What I do advocate is government investment in, and protection of, a system of providing common knowledge for the greater good of all in the way that public university systems once hoped to do. Just possibly this could be done through platforms such as yours, but only if the information that you are gathering and appropriating for private ownership is socialized on a global scale.

A true educational Commons would be a force for reducing academic hierarchy and income inequality. I’m all in favor of that. You say you are too. But is that what you are telling your partners in finance and university administration? Or are you telling them that they can accumulate even more of what they already have—money and prestige—while appearing to be giving it away? I will know my course has been successful when my students understand Coursera’s business model behind offering free higher education globally (along with the promise of greater social equality) as an exciting venture capital investment opportunity through which to increase privately-held wealth and lock in existing educational hierarchies.

Bob Meister,
Professor of Political and Social Thought in the Department of the History of Consciousness, UC Santa Cruz and President of the Council of UC Faculty Associations

PS: Would you be willing to co-teach this course with me? I’m sure that together we could reach a very large audience indeed.