Sunday, May 04, 2008

What value does a university add?

In judging what a university does to a student, a key problem lies in distinguishing differences in raw material vs. differences in training. Do IIT graduates do well because they were smart to start with, or because they learned something at IIT? The resources being expended by society on universities are misplaced if the universities aren't adding value. Michael Spence showed us the value of signaling in the labour market in 1973: it may be rational to employ IIT grads even if the university teaches them nothing.

It's possible to get stuck in an equilibrium where employers value a university because it attracts bright entrants, and the university attracts smart people because this is a good signal on the labour market. The university can then be a prodigal waste of resources, that doesn't add value to students, but the situation can be an equilibrium.

How does one break out of these situations? If there was a strong signalling value to getting through the CAT, but ISB taught me more than IIM, then I could put my CAT rank on my resume, and go on to study at ISB instead. This gives me the best of both worlds: the signalling value of the CAT coupled with the education of ISB.

David Friedman has a blog post in which he shows a situation where a small change in policy design can possibly obtain a big impact on the way the world works. His setting is law schools in the US. The innate ability of students is measured using the LSAT examination, and then they try to go to various law schools. But all this is a means to an end: The end is winning at the bar examination.

One proposal to measure the value of the school, which is at a proposal stage, is to require the school to disclose bar passage rates. Think of this as asking coaching classes to reveal the fraction of their kids that get into IIT.

David Friedman rightly points out that bar passage rates depend on a combination of the raw ability of students and characteristics of the school. This problem is easily solved: ask schools to disclose bar passage rates as a function of LSAT scores. This way, if I have a given LSAT score, I can shop amongst schools that give me the maximum bang for the buck in terms of bar passage rates at my LSAT score.

This is a rare situation which affords such a neat solution. In most situations, it is much harder to disentangle the raw ability of the student and the contribution (or lack thereof) of the school. I wonder if there are other such situations where clear measurement is possible.

More generally, I think that the conventional university (e.g. MIT or IIT) reflects a bundle of services that may have been appropriate in a different age. It is important to rethink this bundle from first principles, reflecting the way new technologies are making it possible to rearrange information and incentives. As an example, I'm fairly convinced that we should shift away from each university having its own lectures, just as we have shifted away from each teacher having his own lecture notes.

7 comments:

  1. That has long been a key to program success in many different specialities: the ability to attract already successful students. Woe to the programs and institutions who have to deal with the students who are not self-starters.

    As for universities here in Japan, all things being equal (in theory), the institutions that have the long histories and reputations will almost always be desired more than new institutions, no matter how good the new ones might be. The old institutions seem to sustain cross-generational networking into high-status careers.

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  2. I did my MBA from one of the most forgettable universities in India. I had lots of dreams when I passed out but reality hit me hard when I passed out.

    Contrary to what you would expect, the reality was this: It did not matter what you learn, what matters is what initials your institute is known with.

    I happened to visit the institute last week. Nothing has changed. NOTHING. It is still that same s***. I feel really bad for the people who have dreams but go to these butcher shops to become MBAs and make a life - of course, they are butchered.

    ----

    Networking!!! Only networking these people know is one that wires connect.

    AARRRGGGHHHH!

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    1. > It did not matter what you learn, what matters is what initials your institute is known with.

      This may be true for employment, and depends a lot on the value society perceives, but relatively less matters for entrepreneurs. While I sympathize with you, I also believe that the toughest guys give a s*** about what others believe to be your ability.

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  3. From DNA Money (www.dnaindia.com) today, an interesting piece by sramana mitra:


    Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. http://www.sramanamitra.com. She has a master's degree in electrical engineering and computer science from the Massachusetts Institute of Technology.

    In this new running series, called India Vision 2020, Sramana invites readers to take a journey with her into the future through the minds of multiple entrepreneurs, who, by addressing the opportunities she sees today, will perhaps shape the future of India.
    She asks readers to close their eyes and exist in this future --- in 2020, as it were --- and BE each an entrepreneur.


    A multi-billion-$ enterprise called 'MIT India'

    Or, how to create one of the most powerful engineering workforces in the world


    Sramana Mitra


    Twelve years ago, in 2008, it was clear that the labour arbitrage based IT services industry that had made India a player in the global technology market, was facing a threat. The key issue was supply-demand equilibrium. India's engineering education system simply could not keep up with the demand for talent.
    Engineering schools below the top tier (IIT, IISC and a few others) were struggling due to lack of faculty. Anyone who knew any engineering had multiple multinational companies dangling job offers in front of their nose. Why would they go teach in a small engineering college in a small town?
    Against that backdrop, we started a for-profit, private company to train engineers in India.
    At the time, Susan Hockfield was the president of Massachusetts Institute of Technology (MIT). MIT had also taken a leadership role in the Open Course Ware (OCW) movement, systematically putting every lecture by the institute's faculty online, freely accessible from anywhere in the world.
    We convinced Hockfield to take equity in the company on behalf of MIT, and let us do the project under the MIT India brand, extensively leveraging OCW content. We could, however, only grant certificates, not MIT degrees.
    When we launched MIT India in 2010, we were handsomely financed by contracts from Intel, Infosys, Cadence, Autodesk, Tata Motors and IBM, and hardly raised any outside financing until much later, when we were ready to scale.
    In addition, companies like Cadence and Autodesk donated CAD tools, which our engineering students could learn with.
    Our model was simple. We worked directly with major corporations interested in hiring trained engineers. Our customers, thus, were the companies --- not the students or parents.
    To the youth of India, however, we brought a different value proposition.
    We carefully recruited a set of high-potential students with high school education only, but who were not going onto great colleges or universities. These students, upon acceptance into the MIT India program, were already guaranteed a job at the sponsor company for which we were training them.
    They participated in a rigorous curriculum focused on the engineering discipline of the sponsor's choice. For example, Tata Motors had us train mechanical engineers, while Intel had us train chip designers.
    We had 6 centers in our first year of 500 students each, aligned with one of our sponsors. They were geographically dispersed, and most certainly not in Bangalore, which was already bursting in its seams. IBM's center was in Kolkata, Tata Motors' was in Thane, Cadence and Autodesk were in Kanpur, Infosys in Indore, and Intel in Kharagpur.
    We solved the faculty issue by recruiting a group of talented engineers who were passionate about teaching, and offered them market salary that they would normally get working for multinationals. And our faculty followed MIT syllabus, OCW content, problem sets, exams, etc.
    As batches of students finished our 2-year intensive program, we renewed our contracts with the sponsors, recruited new sponsors, and opened up new centers all over India.
    These contracts were extremely lucrative for us, and allowed us to finance great infrastructure, afford and attract faculty, and address the engineering education crisis that India would have otherwise faced, had we tried to work within the government-approved channels.
    We made a few key strategic choices that made it possible for us to build the $6 billion a year company that we have today with 1,200 MIT India centers, each teaching 2 batches of 500 students. Each year, we train a total of 600,000 engineers.
    First, we framed the engineering education problem as a problem of the corporations who need to recruit talent and asked that they pay for a quality solution. They did.
    Second, we did not allow compensation to be a deterrent for hiring talented faculty. We paid them handsomely, such that they did not feel they were making a career sacrifice by teaching. This enabled those with passion for teaching to choose an academic career.
    Third, we chose to do this under the MIT brand umbrella, gaining instant credibility among the sponsors, the faculty and the students.
    With that, we created one of the most powerful engineering workforces in the world.

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    1. Sravana has an interesting engineering solution to the "internal training" that companies do today, based on CURRENT needs. What about the "fundas" that enable the "graduates" to meet future or unforeseen needs?

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  4. There is a measure of 'value addition' by schools that is in use in schools in England. It tries to measure the progress made by the pupils during their time at the school, having normalised for the quality of the intake. The intake is measured by a baseline test, and I beleive the output is measured by the general exam. While statistically interesting, itis not fashionable to either trust or recommend this measure of value (via the exams are evil, they do not measure the right things school of thought)

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  5. A University is different from an Institute. The value that a university adds is quite different from an institute. An institute is quite focused on a particular discipline like law school, MBA schools and IITs which are focused on Technology.
    Universities allow cross pollination of thoughts from multiple fields and add real value which cannot be faithfully measured in any framework. We have hardly any University in India using which we can understand this. There are some so called Universities whose main task is conducting exams and others who are divided into departments with hardly any interaction taking place between those departments.

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