Changing Higher Education

Columbia goes global following a different track

Columbia University today announced the opening of several global research centers:

In a concerted effort to deepen its already extensive global perspective, the University is establishing Columbia Global Centers in Beijing, China and Amman, Jordan. They are the first of what the University plans as a network of centers around the world to promote and facilitate international collaborations, new research projects, academic programming and study abroad, enhancing Columbia’s historical commitment to global scholarship... ..
Columbia Global Centers will provide flexible regional hubs for a wide range of activities and resources intended to enhance the quality of research and learning at the University and around the world. The goal is to establish a network of regional centers in international capitals to collaboratively address complex global challenges by bringing together scholars, students, public officials, private enterprise, and innovators from a broad range of fields.

This is a very exciting new approach to globalization for higher education.  I discussed a very similar approach in an earlier post Modularity in university higher education: Research, June 16, 2006. It builds on the understanding that “optimization” of research and teaching in a globalizing world involves putting together the most effective teams, using the best researchers around the world.  Regional centers provide an anchor that give the teams stability and breadth beyond that which can be achieved with typical multi-investigator projects.  A fascinating - and overdue - experiment!

Losing the world’s best and brightest: America’s new immigrant entrepreneurs, Part IV

The title of this new report from the Kaufman Foundation tells you a lot about its conclusions.  The authors, Vivek Wadhwa, AnnaLee Saxenian, Richard Freeman, and Alex Salkever used a Facebook based approach to interview over a thousand foreign national students at US institutions of higher education.  The report does not claim to be definitive in any way: it was not designed with random choice of interviewees, does not have a longitudinal component, etc.  However, it does make some very important points that will probably resonate with many of us who come into contact with international students on a regular basis.

The title also lets you know that this is part of a Kaufman Foundation series looking at immigrant entrepreneurship in the US.  As stated in the press release for this report:

Immigrants have contributed disproportionately in the most dynamic part of the U.S. economy—the high-tech sector—co-founding firms such as Google, Intel, eBay and Yahoo. In addition, immigrant inventors contributed to more than a quarter of U.S. global patent applications. Immigrant-founded U.S.-based companies employed 450,000 workers and generated $52 billion in revenue in 2006.

Many of these immigrant entrepreneurs arrived in this country as students, were trained at US institutions of higher education, and stayed here to follow their dreams.  Thus, the future plans and aspirations of  members of the current generation of international students are likely to have important implications for the health of the US economy in the future.  This report has good news and bad news on that front.

Failed experiments in offshore campuses

Kris Olds has a very nice post in GlobalHigherEd looking at recent closings of offshore campuses by US universities. He makes some quite pertinent points about the importance of learning -collectively- from these experiments.  Highly recommended

What now for globalization?

The future of capitalism is here, and it is not what any of us expected.

Lowell Bryan and Diana Farrell in  the McKinsey Quarterly

                                                                                        

I have written often in these posts about the effects of globalization and the rise of the market state on higher education.  Given the economic events of the past year, some recalibration of understanding of  these forces is obviously in order.  This post describes some of my immediate thoughts, starting with a re-visitation of the work of Philip Bobbitt that underpins the arguments made in several of my previous posts.

In his influential 2002 book, The Shield of Achilles, Philip Bobbitt described the global transition from a nation-state form of organization (in which the state seeks to provide for the welfare of its citizens) to that of a market state (in which the state seeks to maximize the opportunity of its citizens). This transition is being driven by large global forces that include technology, changing demographics, and the rise of global marketplaces for goods, knowledge, and currencies.  He suggested that there are three models that define the main characteristics of the new market state, and that states will eventually have to make decisions that will lead them primarily towards one or the other of these. The three models are (p 283)

(1) a mercantile state–i.e. one that endeavors to improve its relative positions vis-a-vis all other states by competitive means, or (2) an entrepreneurial state, one that attempts to improve its absolute positions while mitigating the competitive values of the market through cooperative means, or (3) an managerial market-state, one that tries to maximize its position both absolutely and relatively by regional, formal means (trading blocks, etc.). 

Each of these different models has its own strengths and weaknesses and strategic implications. The Entrepreneurial Market-State is rather libertarian, looking for minimal state intervention in the economy and the private lives of citizens. “Privatized health care, housing, pensions, and education, as well as low taxes and low welfare benefits all characterize such states.” (p671). The US fits into this category.  The Mercantile Market –State “relies upon a strong central government to protect national industries, subsidize crucial research and development, and steer certain important enterprises toward success.”   “Opportunities available to the consumer…are sacrificed to the long-term opportunities of the society.”  In addition, “These societies are able to maintain social cohesion...in part because income disparities are suppressed, variations in take-home pay between manufacturing workers and service workers are rationalized, and elaborate social welfare subsidy systems, including public housing and access to education, are put in place…” (all p.671) Ensuring social stability might be said to be the goal of the Mercantile Market-State.  Many Asian economies fall into this category. Finally, there is the Managerial Market-State. This form is characterized by “free and open markets within a regional trading framework, a government that provides a social safety neat and manages a stringent monetary policy, and a socially cohesive society.”(p.672) “Strong national unions negotiate contracts across whole sectors of the economy rather than by individual company or factory.” Assuring social equality is one of the major goals of this form. Much of Europe falls into this category.  Bobbitt predicts strong competition (or perhaps conflict) between these different forms of market state as each seeks to become the constitutional archetype of the market-state.

How is Harvard like Lehman Brothers?

As I read Bernard Condon and Nathan Vardi’s fascinating recent article in Forbes, it would seem that Harvard and Lehman had rather similar investment philosophies - and ended up with similar results.

Harvard, in its search for ever higher returns and a conviction that the good times would roll forever, had as of last July managed to become more than fully invested - it had a 105% long position.  But then the economy began to turn, and leverage started to work against them. Condon and Vardi report:

Harvard had derivatives that gave it exposure to $7.2 billion in commodities and foreign stocks. With prices of both crashing, the university was getting margin calls--demands from counterparties (among them, JPMorgan Chase  and Goldman Sachs  for more collateral. Another bunch of derivatives burdened Harvard with a multibillion-dollar bet on interest rates that went against it.( Interest rate swaps that Larry Summers authorized as President.)

Unfortunately for Harvard, the 105% leveraging meant that Harvard University had no cash on hand to meet the margin calls.  So they had to do what we see so many investment firms had to do - begin to sell stocks into a falling market.  In addition, they had their own version of mortgage backed securities sitting in their portfolio. These were private equity partnerships, which are not only hard to price to market, but also typically commit the owner to significant future additional purchases.  Pretty illiquid, especially in a falling market.  Harvard has tried to sell these, but purchasers are hard to find.  So:

Now, in the last phase of the cash-raising panic, the university is borrowing money, much like a homeowner who takes out a second mortgage in order to pay off credit card bills. Since December, Harvard has raised $2.5 billion by selling IOUs in the bond market. Roughly a third of these Harvard bonds are tax exempt and carry interest rates of 3.2% to 5.8%. The rest are taxable, with rates of 5% to 6.5%.

It doesn't feel good to be borrowing at 6% while holding assets with negative returns. Harvard has oversize positions in emerging-market stocks and private equity partnerships, both disaster areas in the past eight months.

Andrew Rosenfield, also writing in Forbes, says

Harvard is the world's best-financed university with an endowment today worth well over $25 billion, more than 20 times the size of its endowment in 1970. Yet the Harvard endowment may have lost as much as $12 billion in 2008. (It had $37 billion as recently as 12 months ago.)

It is likely that Harvard lost more in 2008 than the total amount of the endowments of each of Cambridge, Chicago, Columbia, Duke, MIT and Oxford. In fact, it seems Harvard lost more last year than the total value of every other university endowment in the world with the exception of Yale, Princeton and Stanford. 

So now we understand why Harvard decided to go for a 3.5% tuition increase when the CPI showed a 0% increase.  Like so many of the investment houses, they need a bail-out. Unfortunately, TARP does not seem to be written to include cases like this, so Harvard has had to turn again to students and their families for their bail-out.

Can for-profit education save the free press?

The Washington Post Company has just released its 2008 earnings report.  The Washington Post and Newsweek, like most other print media, are having financial difficulties under the two pronged attack of the digital revolution and the severe downturn in the economy.  The two had an operating loss of about $212 M in 2008, compared to an operating income of about $190M in 2007 .  The television broadcasting division also saw decreasing operating income (-13%), but still had a substantial positive contribution of  $123M to the company’s bottom line. On the traditional communications business side of the leger, the big winner was the cable television division, which achieved an operating income of $162M, or a 31% increase above 2007.

The most profitable and fastest growing division of the Washington Post Company was its division that has little to do with communication in the traditional sense - Kaplan.  Kaplan’s operating income was $206M, up 38% from 2007.  Education almost covered the loses of the company’s flagship print divisions!  

Unfortunately, the print divisions are losing ground faster than the education division can grow, so this rough balance is unlikely to persist unless the print divisions can make a major turn-around.  Thus, the answer to the question of the title of this post is probably “no”, at least insofar as the question relates to the Washington Post Company. However, the Kaplan division is obviously going to be a major component of the Company’s attempts to find a solution to its problems. 

The other information that can be gleaned from this is that at least one company in the for-profit education field is growing rapidly in these difficult times. Maybe every corporation should have a for-profit education arm?