Gloom and Doom for Traditional Universities?

There's an interesting article at WebWire that I found linked to U. Bus. predicting the end of the traditional model of universities. This is predicated on the existence of disruptive technologies, that the higher ed industry is mature and incapable of much innovation, and that it is currently overpriced. The following quote attributed to Peter Druckeris is cited from Forbes:

Thirty years from now the big university campuses will be relics. Universities won’t survive. It’s [Internet technology] as large a change as when we first got the printed book…The cost of education has risen as fast as the cost of health care…Such totally uncontrollable expenditures, without any visible improvement in either the content or quality of education, means that the system is rapidly becoming untenable. Higher education is in deep crisis.

As an example of things to come, the author gives us Andrew Jackson University's 'sponsored tuition' program. It's a fascinating idea--pay for the marginal cost of instruction for those students through commercial sponsorship. Here's a quote from AJU President Don Kassner, taken from Wikipedia:

Most universities spend a tremendous amount of money to recruit students. Many spend as much as thirty-five percent of their revenue on marketing and advertising. They have to keep their tuition high to recover these costs. We eliminated these costs by structuring relationships with strategic partners that refer potential students to us. Therefore, we can operate a quality, degree granting institution without the escalating tuition and excessive fees deemed necessary by many schools.

That's a glimpse of the disruptive technologies part. What about inflexibility of the current system?

Anyone who's ever served on a committee will not find it hard to believe that higher education as an industry is not going to change overnight. A study from The National Center for Public Policy and Higher Education and Public Agenda called The Iron Triangle (pdf), which seeks to illuminate the gearworks of change in higher education. The authors quickly get to a central problem: "The various stakeholders must agree on the definition of the problem." Moreover, principles (according to the article) are locked into a mentality of thinking of cost, access, and quality as forming what mathematicians would call a partition--improving one variable necessarily has adverse effects for the other two. It's a zero-sum game, in other words. The stakeholders do not necessarily hold the same view--the industry is seen as bloated an unresponsive. Within the report are found comments by presidents on the subject of cost, access, and quality. These are very interesting and highly recommended for reading in detail.

Not all presidents bought the premis of the iron triangle. Here's a quote from one president, which resonates in light of current events in the auto industry:

Years ago I heard a speaker from the auto industry who asked, ‘What
happened to the auto industry in the 1970s? It wasn’t bad design. It wasn’t
planned obsolescence. It wasn’t unions. Fundamentally, it was hubris. It was
a belief that the American automobile industry had always built the best
vehicles, always would, and that the public would buy whatever we built.
We saw our problem not as a product problem, but as a marketing problem.

Maybe. I think it's a little more complicated than that. Here's one idea to consider.

What if the market for the best students has become more liquid, driving up their price? That would mean that for the same cohort of talented students, universities generate less revenue from them because they're bidding against each other. Who makes up the short-fall? Costs can get pushed down to the need-based crowd, which is what's been happening (see practically any issue of Opportunity for such an argument). This has been enabled by cheap money. So the combination of aid leveraging for talent and easy money could be part of the answer. It would be very interesting to see the financial aid matrices for various institutions over the last ten years, to see how they've evolved.