Higher Education Strategy Associates

Author Archives: Alex Usher

March 29

Conflicting Views on Research Funding

Every year on budget night, we at HESA Towers publish a graph tracking granting council expenditures in real dollars.  This year it looks like this:

Tri-council Funding Envelopes

Research Council Funding.png

Some people really like the graph and pass it around and re-tweet it because it shows that whatever governments say about their love for science and innovation, it’s not showing up in budgets.  Others (hi Nassif!) dislike it because it doesn’t do justice to how badly researchers are faring under the current environment.  Now, these critics have a point, but I think some of the criticism misunderstands why government funds research in the first place.

The critique of that graph usually makes some combination of the following points:

  1. Enrolments have gone way up over the past fifteen years, so there are more profs and hence more people needing research grants.
  2. At some councils, at least, the average grant size is increasing, sometimes quite significantly.  That’s good for those who get grants, but it means the actual number of awards is decreasing at the same time as the number of people applying is increasing.
  3. In addition to an increasing number of applicants, the number of applications per applicant also seems to be increasing, presumably as a rational response to increasing competition (two lottery tickets are better than one!).

Now, from the point of view of researchers, what all this means is that “steady funding in real dollars” is irrelevant.  On the ground, faculty are having to spend more time on grant proposals, for fear of not receiving one.  The proportion receiving awards is falling, which has an effect on scientific progression, particularly when it happens to younger faculty.  So it’s easy to see why the situation has academic scientists in a panic, and why they’d prefer a graph that somehow shows how applicant prospects of receiving grants are nosediving.   And that graph would as be as undeniably true as the one we publish.

But, from the perspective of Ottawa, I think the answer might well be: “not our problem”.

Here’s why.  The main reason governments get into the research game is to solve a market failure.  The private sector can’t capture all the benefits of basic research because of spillovers, so they underinvest in it.  Therefore, governments invest to fill the gap.  This has been standard economic theory for over 50 years now.

So, to be blunt, government is there to buy a particular amount of science that is in the public interest given corporate underinvestment.  It is not there to provide funds so that the academic career ladder works smoothly.

Provinces and universities decided to hire more science profs to deal with a big increase in access?  Great!  But did anyone ask the feds if they’d be prepared to backstop those decisions with more granting council funds?  Nope. They just assumed the taps would keep flowing.  Academia decided to change the rules of pay and promotion in such a way that emphasized research, thus creating huge new demand for more research dollars.  Fantastic!  But did anyone ask the feds to see how they’d cope with the extra demand?  Nope.  Just hope for the best.

There’s a case, of course, to say that the federal government, via the granting councils, should be more concerned than it is with the national pipeline for scientific talent.  What’s happening right now could really cause a lot of good young scientists to either flee their careers or their country (or both), and that’s simply a waste of expensively-produced talent.  But for the feds to thoroughly get into the business of national science planning requires provinces and institutions to give the councils a more direct role in institutional hiring decisions and the setting of tenure standards.  I bet I can guess how most people would feel about that idea.

So could the government put more money into granting councils?  Sure.  Could some councils make things better by reversing their Harper-era decisions to go with larger average grant sizes?  Yes, obviously.  But let’s remember that at least part of the problem is that institutions and academics have taken a lot of decisions over the past twenty years about what research and scientific careers should look like with very little thought to the macro fiscal implications, under the assumption that the feds and the councils would be there to bail them out.

That needs to change, too.

March 28

The Western China Dilemma

The South China Morning Post ran an interesting piece recently on the roll-out of China’s Thirteenth Five-Year Plan for Education.  It suggested that in the central and western regions of the country – that is, the poorer, non-coastal bits – the bulk of the task of educational development , including higher education, is going to fall on the private sector.  And yes, this is communist China we’re talking about.

Now at one level this might look like a smart move.  Across most of East Asia in places like Japan, Korea and Taiwan, the private sector provides the majority of spaces in higher education, so why not China?  And besides, parents are prepared to save vastly more for education in that part of the world and so cost is less of an object.  With the economy slowing, the Chinese government is becoming warier about spending money (at least on non-infrastructure projects), so a shift to a model where educational expansion is driven more by the private sector makes a certain amount of sense, right?

Well, I’m not so sure.  I suspect this is just storing up problems for later.

Educational opportunity is distributed very unevenly in China.  It’s not just that participation rates are much higher in the rich eastern provinces than in the poorer central and Western ones.  It’s also that the most prestigious institutions are concentrated in a relatively few areas, particularly Beijing and Shanghai.  This wouldn’t be a problem if these institutions had control over their own student intake and could accommodate the best and brightest from across the country, but they don’t. Instead, each is required to guarantee that a large majority of its places goes to students from its own region.

As everyone knows, in Asia there are two types of private institutions.  A very few of them – those with histories going back a century or so – are pretty good.  Think Keio and Waseda Universities in Tokyo, or Yonsei and Korea Universities in Seoul.  But the majority are pretty weak academically.  And so, what Beijing is offering to the poorer provinces is a lot of lower-quality education; but absent any big new investments in the public system, they aren’t going to get new access to prestige education, which is what the emerging middle class always wants.

Beijing has tried to deal with this problem by making some provinces – notably Hubei and Jiangsu – give up some of their reserved spots at top universities to allow students from these poorer areas.  As Mike Gow, author of the excellent Daxue blog, noted last year these two provinces were made to give up 26% and 18% of their spots this past fall, mostly for the benefit of Yunnan, Tibet and Guizhou provinces.

This, needless to say, has seriously ticked off parents in Hubei and Jiangsu.  In fact, some observers in Hong Kong suggest that this is leading to a new political consciousness among those  in the regions’ middle classes.  Indeed, one suspects the Party knew that this might be the case when it selected Hubei and Jiangsu as the test sites for these policies rather than the more politically sensitive Beijing and Shanghai regions.

The only way to solve this problem in the long run is to start gradually building up some flagship universities in the underdeveloped west.  But this five-year plan is pushing the party towards a quick-and- dirty approach to education in those areas, not a higher-cost quality approach.  Eventually, that’s going to lead to serious political problems either in the interior regions (if mobility continues to be restricted) or in eastern provinces (if mobility is allowed).

Greater affluence leads to greater competition for status goods like education.  To the extent the Communist Party wishes to maintain popular acquiescence to its rule, it has to satisfy those demands.  As growth slows, that task is getting harder.  Keep watching this space.

March 27

Losing Count

Stop me if you’ve heard this story before: Canada is not sufficiently innovative, and part of the reason is that we don’t spend enough on research.  It’s not that we don’t spend enough on *public* research; adjusted for GDP, we actually do above-average on that.  What pulls us down is in international comparisons corporate R & D.  Our narrow-minded, short-sighted, resource-obsessed business class spends far less on R&D than its equivalents in most other country, and that is what gives us such a low overall R&D spend.

Familiar?  It should be; it’s been standard cant in Canada for a couple of decades at least.  And it gets used to argue for two very specific things.  There’s the argument which basically says “look, if private R&D is terrible, we’ll just have to make it up on the public side, won’t we?”, and where else to spend but on university research?  (Universities Canada used to make this argument quite a bit, but not so much lately AFAIK).  Then there’s the argument that says: well, since under the linear model of innovation in which public “R” leads to private “D”, the problem must be that public “R” is too theoretical on insufficiently focussed on areas of national industrial strength – and what we really need to do is make research more applied/translational/whatever.

But what if that story is wrong?

Last year, the Impact Centre at the University of Toronto put out a little-noticed paper called Losing Count. It noted a major problem related to the collection and reporting of R&D.  Starting in 1997, Statistics Canada adopted a definition of Research and Development which aligned with Canada’s tax laws.  This makes perfect sense from a reporting point of view, because it reduces the reporting burden on big corporations (they can use the same data twice).  But from a measuring Canada against other countries perspective, it’s not so good, because it means the Canadian statistics are different from those in the rest of the world.

Specifically, Canada since 1997 has under-reported Business R&D in two ways.  First, it does not report any R&D in the social sciences and humanities.  All those other OECD countries are reporting research in business, financial management, psychology, information science, etc., but we are not.  Second, work that develops or improves materials, products and processes, but that draws on existing knowledge rather than new scientific or new technological advances is not counted as Research & Development in Canada but is counted elsewhere.

How big a problem is this?  Well, one problem is that literally every time the Canada Revenue Agency tightens eligibility for tax credits, reported business R&D falls.  As this has happened a number of times over the past two decades, it may well be that our declining business R&D figures are actually a function of stricter tax laws than they are of changing business activity.  As for the difference in absolute amount being measured, it’s impossible to say.  The authors of the study took a sample of ten companies (which they recognize as not being scientific in any way) and determined that if the broader, more OECD-consistent definition were used, spending on R&D salaries would rise by a factor of three.  If that were true across the board (it probably isn’t) it would shift Canada from being one of the world’s weakest business R&D performers to one of the best.

Still, even if this particular result is not generalizable, the study remains valuable for two reasons.  First, it underlines how tough it is for statistical agencies to capture data on something as fluid and amorphous as research and development in a sensible, simple way.  And second, precisely because data is so hard to collect, international comparisons are extremely hard to make.  National data can be off by a very wide factor simply because statistical agencies make slightly different decisions about to collect data efficiently.

The takeaway is this:  the next time someone tells a story about how innovation is being throttled by lack of business spending on research (compared to say, the US or Sweden), ask them if they’ve read Losing Ground.  Because while this study isn’t the last word on the subject, it poses questions that no one even vaguely serious about playing in the Innovation space should be able to ignore.

March 24

Representing Universities

Some light reading today, after a heavy week.

There’s a lot of talk these days about the political divide between those with higher education and those without. But I want to take you back to a time, where that political divide was made real. A time when universities actually had their own seats in Parliament, non-physical constituencies where the electors were made up entirely of alumni.

The practice of granting universities representation in Parliament seems to originate in Scotland sometime in the late 15th or early 16th centuries; certainly by the time James VI of Scotland took the Crown of England in 1603, it was well established. Upon James’ accession to the throne in London, he created Parliamentary constituencies for both Oxford and Cambridge, and gave each two seats (i.e. they were multi-member constituencies and the top two vote-getters won seats). Oxford’s church connections meant that it reliably delivered Royalist or Tory MPs, and some of the greatest names of the age represented it in Parliament, including Isaac Newton and Francis Bacon. Cambridge, on the other hand, was a hotbed of revolutionary activity and was represented at various points by two of Oliver Cromwell’s sons. Briefly, this system spread to the colonies: in the late seventeenth century William & Mary had a seat in the Virginia legislature.

As university education expanded in the UK, so too did the number of university seats. The University Dublin received a seat at Westminster in 1801 (having previously had a seat in the Irish Parliament). The Scottish universities were not given Westminster seats after the act of union but did receive seats (2 to split between the four of them) in 1868; the University of London was given a seat at the same time. Belfast and the University of Wales were given seats in 1918 as was – very temporarily as it turned out – the National University of Ireland. More interestingly, also in 1918, graduates of all other universities in England were given a combined 3 seats, meaning that in the election of that year, there were a total of 14 seats out of the 707 up for grabs (2% of the total) which were elected solely by university graduates.

There were echoes of this approach outside the UK as well. In Sweden and Finland, for instance, where “estate”-style Parliaments existed well into the nineteenth century, universities received positions in Parliament by virtue of their membership in the clerical estate. Within the British Empire, an attempt to imitate this system died a quick death in Australia (the University of Sydney had a seat in the New South Wales Parliament in one election in the 1870s), but lasted somewhat longer in India.

Elections to these seats were somewhat odd affairs. All alumni of an institution could vote in these elections, and this vote was in addition to their vote as a resident of a particular constituency (readers from British Columbia may remember something similar in that until 1993 business owners could get a second vote in municipal elections if their business was in a different district that their residence). However, to exercise the franchise, voters actually had to come to the university to vote (at some point – I can’t work out when – a postal vote option was added). To accommodate electors, polls were held over several days – usually after the general election. Campaigning was not really “done” and in fact during the voting period candidates were required to stay at least 10 miles away from the university. Of interest to Canadian electoral nerds: voting in multi-member constituencies was done by Single Transferable Vote. Civilization does not appear to have collapsed as a result.

By the twentieth century, these seats still often elected Tories, but it became the custom to elect established academic celebrities or public intellectuals as independents. But their days were numbered: when Labour finally won a majority government in 1945, it abolished all forms of plural representation, and so the last university members of Parliament exited the chamber in 1950.

Curiously, the practice still exists today in the unlikeliest of places. Ireland, which split from the UK in 1922, retained the concept of university constituencies in its Parliament (Dáil) until 1937. Under the new constitution of that year, the University of Dublin and the National University of Ireland each received 3 seats in a 60-seat Senate, which they retain to this day. This makes more sense if you understand that the Senate of Ireland is one of the world’s most deeply bizarre legislative bodies, where 100% of the membership is indirectly elected through various corporatist bodies.

Bon weekend.


March 23

Federal Budget 2017

Morning all.  A long night last night at HESA Towers as we covered Budget 2017, which contained an exhaustingly large list of little programs (as well as a few big ones) affecting post-secondary institutions.  You can find our full budget analysis here.  My thanks to the HESA crew – Paul, Melonie, Johnathan and Jackie – for sticking it through the evening.
Just a few thoughts, from very late last night: Budget 2017 is uneven: some parts are good, others not so good.

Unequivocally, the Skills component is excellent.  The money for Indigenous peoples is a great step, as is the commitment to provide more help for mature students.  The biggest investment, on skills training, properly goes to the provinces through the existing Labour Market Transfer arrangement and the amalgamation of several of these transfers means that provinces will have more flexibility in designing new programming.  One could quibble about the lack of detail on some programs (e.g. the CSLP “pilot projects”), but that would be churlish.  And the one initiative that had the potential to be a disaster (FutureSkillsLab) has been hedged in such a way that the government can take several more months to get the essentials right (which means spending lots of time with the provinces).  Overall, the Government has done good work here, and unlike last year, their efforts cannot be derided as solely university-focused; colleges will do well out of the training provisions.

An aside here: universities and colleges have not got what they asked for on Work-Integrated Learning, but I think the government has done the right thing by putting all its eggs in the MITACS basket.  Effectively, the government has said it is happy to play a role in Work-Integrated Learning, but only for graduate students, where the outcomes are tied to other policy goals around innovation.  Undergraduate students?  College students?  No thanks, that’s a provincial responsibility.  That’s both shrewd and respectful of provincial turf.

The Innovation section is not great, but the thinking on display is a lot better than it has been for most of the last 12 months.  The government still confuses growth policy with innovation policy, but at least it has realized that innovation is mostly about firms.  There are all sorts of justifiable trepidation about government “picking winners,” and no doubt regional jealousies will play an outsized and unwarranted role in the final set of decisions, but you know, baby steps.

Where the budget really falls down is on Science.  Between the unconscionable stalling on the publication of David Naylor’s report on Fundamental Science and now the funding freeze – not to mention the ongoing fiasco at CIHR – the nation’s academic scientists are going to be at war for funding.  Any goodwill the government fostered from last year’s bump of council funding is almost certainly gone.  For a government that prides itself on being pro-science, they have a big communications challenge ahead of them for the next 12 months, even if they do intend to make big investments in the area next year, as some have suggested.

On the whole, there is more to like in this budget than not.  Students in particular will be happy.  But the government has squandered an enormous amount of goodwill among scientists.  Expect a lot of sniping from this quarter: and it’ll be aimed not just at government but at the university administrators.  Universities Canada’s decision to not criticize the government, even a little, over the granting council snub will almost certainly not play well in laboratories across the country.  Stay tuned.

2017 Budget Commentary

March 22

The Next Big Skills Policy Agenda

So today is budget day.  If the papers are anything to go by, there’s something big-ish in there about “skills” which will no doubt be presented as some massive benefit to the country’s middle class (and those trying to join it). I have difficulty imagining what might be announced since most skills policies are in the hands of the provinces.  But what I do know is that skills policy is an area long overdue a makeover.

The labour force is aging.  Any new burst of productivity – essential for rising incomes – is going to have to come from older workers, not newer ones.  Part of that is going to have to come from firms making greater capital investments – that is, better machines and IT infrastructure for workers to use.  But part of it is going to have to come from more intensive and continuous skills upgrading on the part of workers’ themselves.  And this is a problem, because historically Canada has been uniquely bad at achieving a culture of skills upgrading.  Go back year after year, report after report, and it’s the same story: where continuous upgrading is concerned, it tends to be concentrated among people who already have high levels of skills.  Those that have get, those that do not, do not.

Part of the problem here is funding.  That’s why we sometimes see government get interested in handing money either to individuals or to firms (for example, the Canada Jobs Grant) to subsidize training.  But I’d argue that money is at best a partial barrier to more training.  A larger barrier is time.  And a lot of existing institutional practices are as much a hindrance as a help in this regard.

Workers don’t have a lot of spare time.  They have jobs, kids, parents, families: all of which make time a scarce resource.  We don’t normally think of time as something governments can control, but they actually do have a couple of policy levers they could pull, if they wanted to.  First, they could create incentives or entitlements to time-off for the purpose of training/re-training.  This idea was mooted 35 years ago in the Macdonald Commission report as a “Time Bank” – every year, workers would accrue a certain amount of time off specifically for the purpose of training.  It would no doubt be a colossally unpopular move among employers, but is still probably something worth considering (and might not create that much dissension provided it was fairly applied across all workplaces and didn’t create free-rider problems).

But the other way to make more time available to people is to radically re-consider the nature of the credentials being sought.  Universities, God Bless ‘em, have never seen a labour market problem they couldn’t design a 1- or 2-year Master’s Degree to solve.  The problem is a) not everyone wants to do a year of full-time study (or the part-time equivalent over a longer period of time) and b) who really wants to wait until next September to get started if you just got laid off last week?

From an adult learners’ perspective, the best thing in the world would be credentials that are both shorter and continuously available.  The latter can be solved to some extent simply by throwing money at it.  Continuous intake is relatively easy if you have more instructors to teach more classes at different times of the year.  Putting a greater fraction of classes online could conceivably bring some economies of scale that would assist in the process.

But the bigger problem is reducing the length of credentials.  In theory, there is a pretty clear way forward, which are called “stackable credentials”.  Many institutions use some variant of this: thirty credits equals a certificate and once you bunch three certificates together you get an applied degree, or something along those lines.  But even the notion of thirty credits can be kind of off-putting if what you think you need is just a minor skills upgrade. What is needed is a trusted provider (which usually means a non-profit provider) to come up with a way to come up with smaller-duration credentials which actually convey to employers a sense of competency/mastery in particular fields, and which could also combine over time (i.e. “stack”) into more traditional credentials like diplomas and degrees.

What’s the government role in this?  Well, the problem is really one of co-ordination.  Individual campuses can experiment with short credentials or competency-based credentials all they like: if employers don’t understand the credentials, they will be worthless.  What is needed is collective action – someone has to corral institutions to work together to create new credential standards, and someone needs to corral business to talk about what feature they would find most useful in new, shorter credentials.

That may sound like a job for somebody like the Business-Higher Education Roundtable.  But frankly, some coercion is called for here.  My guess is if BHER floated this you’d probably get a few Polytechnics showing up to play (because it’s the kind of thing they do) and no one else.  But government has the muscle and dollars to make this happen a heck of a lot more quickly and efficiently.

Now, note I say “government” and not “the Government of Canada”.  It would be better all around if provincial governments, who constitutionally are the ones in charge in this area, took the lead.  But one could argue that the feds – provide they stay the hell away from directly funding institutions or getting too far into the curriculum weeds themselves – could at least nudge the key players towards the table.

Bottom line: if we want higher labour productivity we have to get much more serious about creating opportunities for workers to upgrade their skills.  Since the key pressure point for skills upgrading is time, we need to create new, shorter pathways to meaningful credentials.  That means shorter, stackable credentials.  These will need to be designed by employers and institutions together, but the quickest way to start this program runs through governments.  And there’s no time like the present to get started.

March 21

Worst Higher Education Article of the Decade (So Far)

Stop the presses.  I have found the worst education article of the decade so far.  It is by Don & Alex Tapscott, and it is called The Blockchain Revolution and Higher Education.

How dumb is it?  Solar-powered flashlight dumb.  Tripping over a cordless phone dumb.

The problem is that because it’s Don Tapscott and he is – for reasons that are completely beyond me – treated as some kind of national gem, no one ever calls him on his deep wrongness when it comes to education (remember the time  he dramatically announced that in the third week of January 2013 was the week universities changed forever?), so the likelihood is that some people may take this article seriously.  And this would be a terrible mistake because it is nonsense.

A little background.  A blockchain is a distributed database which is both secure and decentralized – something which has interesting applications in finance, electronic money (eg. bitcoin) and contracts.  Some also claim it will have a huge effect on creative industries because it solves a host of intellectual property issues, but this is more speculative, and it requires a whole lot of legal and policy changes, which at this point are pretty speculative.

But databases, no matter how funky and tech-y they are, don’t have many educational uses.  Imagine for a second we are back in 1981 and someone wrote an article about how Higher Education was about to go through a Lotus 1-2-3 Revolution.  They’d probably have been dismissed as fantastical dreamers.  Those were better days: sadly, no one will think of doing this to the Tapscotts.

Now, if you can get past the start of the article where the authors claim the internet hasn’t actually changed how companies do business (yes really) you will come to the claim that bitcoin will revolutionize education in four ways., to wit: student records, pedagogy, student debt and “the meta-university”.  The heart of the argument here is that blockchain is going to create a sea change in records management.  Now, student records are admittedly still fairly clunky.  And it’s possible (as I noted back here) that in a decade or so that people will come up with universal CVs that will standardize and revolutionize the way people describe credentials and achievements.  And it’s even possible that once that happens people will be able to record those certificates and achievements on blockchain.  But then…so what?  Blockchain’s main advantage is that records can’t be altered, which means it could be a great way of dealing with fraudulent records.  But that’s not really that big of a deal.  It begs the question, for those of us not in the habit of producing fraudulent records, what exactly are the benefits of blockchain?

Well, according to the Taspcotts, it basically comes down to the idea that blockchain could let you record competencies and skills in a reliable way, thus changing the way universities work completely.  Huge, massive, changes.  And once everyone knows reliably what skills and competencies you have, most of the machinery around universities disappears and higher education becomes just one big worldwide open-learning park, and those people who can demonstrate through blockchain that they have certain skills and competencies will be paid to teach others the same things and poof! No more student debt.

Honestly, I’m not making this up.  This is their claim.

The fact that we are having trouble figuring out skills and competencies outside narrow professional frameworks?  Irrelevant.  The fact that badges and other such newfangled credentials aren’t really being embraced by employers because they are often finicky and vague)?  Irrelevant.  The fact that you still need institutions to actually manage the learning process and institutions to measure outcomes (they do not, I acknowledge, need to be the same institutions)?  Irrelevant.  The fact that not having blockchain is no barrier to people paying students to teach other skills and yet no one does it because that’s not really how education works and blockchain changes nothing in that respect?  Irrelevant.

Is higher education over bureaucratized, insufficiently innovative, in need of a jolt?  Sure.  But a piece of code doesn’t fix all that.  There are lots of other problems – often genuine political problems – which have to be solved before the alleged minor blockchain revolution can happen.  And just because it can happen doesn’t mean it will.  The kind of higher education system the Tapscotts seem to want is a type which – to quote Tressie McMillan Cottom – really only appeals to free-ranging autodidacts.  For other learners, the kind of institutions the Tapscotts want is a deeply alienating one.  But techno-fetishist windbags never let issues as small as “what customers want” get in the way of a good fantasy.

In sum: Worst. Higher Ed Article. Ever.  Or pretty close to it.  A pretty much textbook case of how you can be a tech guru while understanding literally nothing of how the world works.


March 20

There is no Fourth Industrial Revolution

I am seeing an increasing number of otherwise thoughtful people in Canadian university and research circles going around talking about the “Fourth Industrial Revolution”.  They need to stop.

There is no such thing as the Fourth Industrial Revolution.  It is a catch-phrase made us by Klaus Schwab, head of the World Economic Forum (the Davos folks), which he developed in an eponymous book released in late 2015.  I read it.  It’s dreadful.  Seriously, seriously awful.  No redeeming characteristics whatsoever.

The argument lies in the same kind of shallow “Digital! Clean Tech!  Woo!” analysis that seems to animate Navdeep Bains, our Minister for pro-IT Industrial Policy.  Essentially what it comes down to is that after a long China-driven commodities super-cycle, everyone is interested in more knowledge-intensive industries.  And a bunch of these seem to be (emphasis on seem) to be on the tipping point of some interesting transformations that might have deep economic ramifications: autonomous vehicles, AI, nanotech, quantum computing, materials science, energy storage, etc.  But all of this does not a revolution make.

Generally, economic historians posit that there was one starting in Northern England built around textiles in the eighteenth century, one around mechanical mass production starting in and around Detroit in the early 20th century, and – maybe, this is still disputed – one based around computers and information technology starting in the 1960s/70s/80s (depending on who is telling the story).    The question is really whether all these new technologies that Schwab is so excited about are really new or just extensions of the It revolution of the late twentieth century.  Schwab claims it is because of three factors: “velocity” (change is happening more quickly), “breadth and depth” (some handwaving about “unprecedented paradigm shifts”) and “systems impact” (something about transformation across industries that also looks like a lot of handwaving).  But as several articles noted at the time (see here, here and here), this is fundamentally unconvincing.  All of these new showy technologies are children of the information revolution, and there’s no sign of any radical break in the economy or the pace of technological change that would make us think that there’s been some “revolutionary” break.  Is change occurring?  Of course.  But change has been occurring for decades, even centuries, sometimes at a much faster pace than today.

Now, sure, some might point to the huge amounts of money now being poured into alleged growth industries, like “Clean Tech” (or the “Green Economy” as its sometimes called).  Our Minster for Shaking Hands with Tech Executives, for instance, likes to talk about Clean Tech being a “$3 trillion industry”.  But a lot of that has to do with creative re-labelling of existing economic activities.  So, for instance, one major study which hyped the value of this economy includes in its definition of green tech large swathes of the construction industry (energy efficiency!), the automobile industry (lower emissions!), sewage collection (it’s about waste!)….you get the picture.  Important?  Yes.  But improvements in these areas are mostly about slow transformation of the economy, not some kind of big break with the past. Not, in other words, revolutionary.

And of course, a lot of the hype about these new technologies is just that: hype.  Everyone is talking about driverless automobiles, but there’s no certainty that the legal issues surrounding them will allow them on the road in major numbers for at least a decade (who is at fault if a driverless car gets into an accident?  Who will insure cars if there is ambiguity about this?)  AI sounds like a huge market, but a lot of it has to do with re-classifying what used to be called “software” as AI.  Nanotechnology has been the tech of the future for at least 15 years; biotech for 30.  Etc, etc.  There’s lots of groovy science out there, but turning it into industrial or consumer products at scale is tricky and doesn’t come quickly.  And because modern capitalism isn’t patient, that means a lot of money for product development is going into things which fundamentally don’t raise productivity.  As Peter Thiel once said, “we dreamed of flying cars, we got 140 characters”.

And even if some of these do manage to make it to market, there are some real questions about how much they will change living standards.  If you’re in any way inclined to call yourself a techno-optimist, I really urge you to read Robert Gordon’s The Rise and fall of American Growth, which painstakingly reconstructs the last 150 years of American economic history (it works equally well for Canada, though), and suggests both that a) the high growth rates of the mid-twentieth century were a one-off, never to return and b) that most of the major changes to the workplace due to the It revolution have already happened.

So in any case, if you’re tempted to try to join the Davos buzzword crowd and throw the term “Fourth Industrial Revolution” into a conversation, just don’t.  In a few years, when that term has been properly consigned to the dustbin of history, you’ll thank me

March 17

Lower Ed

It’s only March, but I’m declaring the Higher Ed book of the year competition closed. No one is going to beat Tressie McMillan Cottom’s book, Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy. It is genius.

Before I start praising this book to the skies, it’s worth noting that this is a very American book. Anyone looking for insights into for-profits outside the United States should look elsewhere: the insights generated here do not translate well to other countries. This isn’t a fault: American authors use a kind of ex-cathedra voice saying “this is how it is” because it doesn’t occur to their publishers that there is a world outside the US worth catering to. So when they say “this is how it is” they mean “this is how it is in the US”. This is not a fault of the author, but something to keep in mind while reading it.

What makes McMillan Cottom’s story different from other good accounts of the private higher education market (see for instance A.J. Angulo’ Diploma Mills) is her experience within the industry. After graduating from her Bachelor’s program, she worked in the industry both in the “mom-and-pop” sector of the industry (that is, colleges that are locally owned small-ish business) and the new breed of national chain schools, owned by NYSE-listed companies whose approach to the industry is to simply, relentlessly, make money. She knows the industry from the inside out. As part of the sales force in these two companies, she has a deep understanding not just of the sales techniques, but of the customer base as well.

As was the case for last year’s One Thought book of the year, Sara Goldrick-Rab’s Paying the Price, it’s the way the author allows students to speak for themselves which is so arresting. But in this case it’s an even more stunning technique because for-profit schools themselves have been so misunderstood. McMillan Cottom pushes back – hard – on the idea that private-college students are simply low-information students, that it is in part through ignorance that they attend such high-risk/low-reward institutions. While agreeing that many students are only dimly aware, if at all, of the prestige ladder of higher education and where these institutions fall within it, she counters by saying that what these students understand above all is a form of education gospel – that education and only education will lead them to success. And what for-profit colleges do, primarily, is find ways to satisfy that need in a way with a level of convenience that public colleges choose not to match.

The ridiculously complicated FAFSA (student aid) process? They take care of that for you. Complicated class schedule? They simplify that too. A need to wait until next September to start classes? Nu-uh: in private colleges, intakes start every month, so you can get started right away. If you’re mid-career and need some education to change your life who wants to hang around waiting for months to get started? So what’s the problem?

The problem of course is that return on investment on these course is usually terrible, with students getting sucked far into debt to get credentials that tend not to qualify them for jobs that would make the expense worthwhile. But if states put licensure requirements on – say – hairdressing, which pays maybe $12-15/hour, then what they are actually doing is allowing the people who provide training to enter that field to extract massive amounts of rent. It’s crazy to pay $20,000 for a hairdressing course to get a job that pays so little. But the alternative is no education and no job. And so the schools continue to attract students.

Eventually, as the scale of the con became apparent to her, McMillan Cottom quit the industry to start a PhD in sociology at Emory (key detail: Emory said yes even though the start of class was only a month away – the speed of the application turnaround was consequential). The result of that PhD was this book. It contains some elements which are very traditionally academic, such as a systemic look at how the industry was transformed when big chains of schools took over the market in the aughts, at right around the same time as the US economy began its long, post-dotcom decline. But it also contains some deeply original and arresting moments, such as overheard snippets of conversation in shopping malls.

McMillan Cottom’s critique goes beyond the predatory recruitment techniques of for-profit colleges. She sees them, in a sense, as a natural outgrowth of the current moment of capitalism (she would use the phrase “neo-liberalism”, which makes my teeth ache a bit, even though she uses the term in a more rigorous way than almost anyone else I’ve ever read). If good jobs are becoming scarce and education is required to get those jobs, and public education is insufficiently funded and public post-secondary institutes don’t do their job in terms of making themselves truly accessible (in terms of making enrolment convenient and easily understandable), then yeah – somebody is going to fill that market niche. So is the problem the niche-fillers or the failure of the political system to prevent that niche from opening in the first place?

Anyways, don’t take my word for it. Read it yourself. You won’t be sorry.


March 16

Good Innovation Policy

Yesterday, we looked at what actually constitutes Innovation Policy. Today, I want to talk about what an ideal innovation policy would look like. I apologize in advance for the length of the post.

So, the first ingredient in innovation policy is skills. But this term needs to be understood in some specific ways. It certainly means having a large number of what are called “Highly Qualified Personnel”, which usually but not always means PhDs, across many fields. Part of the deal with innovation is that generating new ideas means having people who are at the cutting edge of science, engineering and social science. In turn, this means spending reasonably big on scientific research because otherwise the good grad students will go elsewhere.

That’s the easy bit. The trickier bit is developing an education system that supports diffusion of new ideas. Innovation is not just about developing new products; it’s about making firms (and public bodies, too) more efficient through the adoption of new technologies and processes. The problem is literally no one knows how to do this. Is it about having a strong secondary school system with high standards? Probably. Can’t hurt, anyway. Does it mean very high levels of university participation? Not clear: Switzerland seems to do very well without this; but arguably it works for Korea and Finland. Does it mean high levels of technical education? Possibly: seems to work for Switzerland and Germany. But Canada has pretty much the highest levels of non-university higher education in the world and it doesn’t seem to work as well for us. So is it something about skills mixes? Does more STEM education (or, God forbid, “training coders”) help you become more innovative? Not really. The US, which despite everything is still seen as an innovation leader, has the lowest rates of STEM graduation (as a proportion of total degrees awarded) in the G7; Italy and France do far better.

So is it something in the way people are educated, something in the pedagogy? Maybe. Is it something non-cognitive, something cultural? Probably. But no one really knows how to change this. That doesn’t mean experiments in skills for innovation are doomed to failure, it’s just to acknowledge that there is a substantial amount of groping around in the dark here. A good innovation policy would acknowledge this. So it would have money set aside for real experimentation in education and training, much like the FutureSkills Lab proposal, albeit with the crucial proviso that in a federal state you really need both levels of government working co-operatively and consultatively (not – repeat NOT – unilaterally) to make this work. And if there’s an area where we should start, it’s in our business schools – we need to better understand why we have a dearth of managers with the skills to boost exports and manage growth.

OK, so that’s education. What next? Rules and Incentives. Barriers to market entry need to be dismantled, cartels smashed: anything that increases competition or reduces barriers to new products getting to market should – barring some reasonable measures around product safety – be adopted. If you want to know why serious innovation policy types laugh at the current Liberal government, it’s due to their total lack of interest in doing anything in these areas while simultaneously proclaiming to be “pro-innovation”. A country which cannot dismantle a dairy cartel cannot be considered an Innovation Nation. Also: let companies get big. There is no earthly reason why Canada taxes big businesses more than small ones. It’s a terrible idea. There are others, but those are the big ones.

The third big one is funding: how do we make sure funds get to innovative new companies?  This is a tough one, not just because of the potential for rent-seeking, but also because it’s genuinely hard to pick winning companies and/or get banks to change policies to lend to younger, more speculative ventures.  The consensus in the Innovation policy world is that Israel seems to do this pretty well, but exporting models like this isn’t easy.  I’m absolutely no expert in the area and so won’t comment further, but just know this is a big issue and any effective Innovation Policy needs to address it.

The fourth and final area is what is often called “innovation ecosystems”. Now this is a slightly fraught term because frankly it can be used to justify pretty much any old thing, and a lot of it is junk.  But the basic insight is this: innovation doesn’t happen in isolation. Firms’ ability to create innovative processes and products depends on their access to finance, talent, and knowledge, (sometimes but not always universities), and their interactions with other firms and with customers. To some degree, this is aided by proximity, which is why people get excited about the role of geographical clusters in innovation.  But to reduce it to proximity is overly reductionist, innovation is not simply a matter of co-location. Networks matter, but not all networks are local.

In fact one of the most obvious gaps in Canadian government policy thinking around innovation is the role of transnational networks in innovation. This simply makes sense: not many production/value chains are located within a single country any more. Among mid-sized countries, the ones that have done best in exploiting new technologies have been those that have worked out niches in global value chains. This has practical implications for policy. Canada may be good at Artificial Intelligence (whatever that means these days), but it’s probably never going to develop many companies that are going to be global players. So the goal of policy should really be to figure out how Canada can develop companies that can thrive as partners to other, larger companies or networks located outside Canada. Think about the automotive industry: Canadian attempts to have full-fledged automobile companies have been disastrous (Bricklin!) but we do pretty well in autoparts (Magna).

I’m not saying it is easy to develop government interventions that foster these kind of connection. But it is easy enough to get rid of rules that inhibit collaboration. For instance, there are rules in tri-council funding which impede collaboration with foreign scholars (and I’m not just talking about making foreign scholars fill in the Canadian Common CV). These rules actually get in the way of long-term partnerships and foreign source of income, like the US National Institute of Health (NIH). And in turn, that restricts knowledge generation in Canada – knowledge that might flow into new products or processes.

To summarize: innovation is a fairly diffuse idea, and our knowledge about how to promote it is patchy at best.  But what we do know is that it is a very multi-dimensional process.  It is certainly not just about hi tech industries.  Equally certainly, it is not just about knowledge generation.  Universities may have been conditioned to think that all research = innovation (in retrospect, the name “CFI” probably was not the most felicitous name choice), but that’s not true either.  It only becomes innovation when it leads to tangible change, which requires knowledge to be adopted outside the institution.

That’s not to say higher education has no role in innovation; the provision of skills and the generation of knowledge are both an important part of the puzzle: so more money for basic research, doctoral studies are definitely in order, as are fewer barriers to international research collaboration.  But so too is a lot of reflection on what makes individual people – particularly those who end up as business leaders – better problem-solvers and innovators.  If universities really want to be part of the solution, they need to be thinking about how pedagogies need to change, not just how other people can write them bigger cheques.  Some do, of course, but it’s far from central to the discourse.  That needs to change.

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