When we published our book Engines of Innovation, the two of us asserted that universities could have a greater impact on the world’s biggest problems by embracing an entrepreneurial mindset. The favorable response both to the book and to the idea that an entrepreneurial mindset has a place within the university was both gratifying and surprising. Although the interest in entrepreneurship among colleges and universities was already sprouting as we were writing our book, by the time it was published, most universities were actually launching some sort of innovation initiative. As we write this introduction, it is hard to find a college or university in this country or abroad that has not enthusiastically embraced the ideas of innovation and entrepreneurship as part of its curriculum and its culture. This interest in making entrepreneurship part of higher education emerged largely in response to the need for new initiatives in an uncertain economy and for universities to prove their relevance in a time of nationwide upheaval.

Our book generated another surprise. Many readers assumed that when we argued that universities could benefit from entrepreneurial thinking, we were suggesting that the university itself should be run like a business. Nothing could be further from the truth. We do believe that many aspects of the university’s operations can benefit from the ideas and ways of thinking developed in the business world. We also believe that commercialization of university ideas and inventions can best be done in partnership with the private sector. But we view these partnerships as essential precisely because the university is not and cannot be run like a commercial enterprise.

The most visible evidence of this last statement is the breathtaking collapse of the for- profit higher education industry. The best-known example is the University of Phoenix, a former darling of Wall Street. The school expanded dramatically in its first years, largely through admitting unqualified students—balance sheets were strong, but admissions standards were lax. After a new president introduced stiffer standards for admittance and took the company private, enrollment dropped: it had been 460,000 students in 2010, but by December 2016, it was 175,000. Meanwhile, in 2015, Corinthian Colleges filed for bankruptcy, closing twenty-eight schools and leaving 16,000 without classes. ITT Educational Services followed suit, shuttering the doors of technical colleges and affecting 35,000 students and 8,000 employees. The move came days after the U.S. Department of Education barred the company from enrolling new students who received federal aid. In a further sign of the disconnect between the for-profit mindset and higher education, one of the leading for-profit entities, Kaplan University, determined that its for-profit model did not work and was acquired in 2017 by the nonprofit Purdue University.

The evidence that colleges and universities cannot be run like a business is not limited to the for-profit sector. A well-known example is the debacle at Mount St. Mary’s University, the nation’s second-oldest Catholic institution of higher learning, located in Emmitsburg, Maryland. Simon Newman was named the university’s president in 2015 largely through his reputation as an accomplished financier and manager, having founded or cofounded four businesses and having worked at various times for Bain & Company, JP Capital Partners, and Cornerstone Management Group. In less than a year, he fashioned a plan to corporatize the school with an emphasis on career education, culminating in his criticizing a professor for thinking of incoming students who were unlikely to succeed as “cuddly bunnies” and suggesting that the professor needed to “drown the bunnies . . . [and] put a Glock to their heads” to improve the school’s rankings. The statement ignited a firestorm of internal and national criticism and resulted in the firing of numerous dissenting professors and a threat of loss of accreditation. Ultimately, Newman tendered his resignation.

But if universities cannot be run like corporations, how should they confront the challenges facing higher education today? We believe the answer begins with understanding a partnership that was struck as early as 1636 with the founding of Harvard College, codified more explicitly in 1862 with the passage of the Morrill Act, fleshed out in the 1930s and 1940s with the establishment of an enlightened national science policy, and settled by the 1960s. In his book Toward a More Perfect University, Jonathan Cole calls this understanding an implicit compact between American colleges and universities and the government. We believe that this compact can best be characterized as a partnership, not only between universities and the government, but between universities and the public at large. This partnership can be described as follows: in exchange for educating a highly competitive workforce and providing leadership in the discovery of new knowledge applicable to matters of public interest, academic communities will be funded and allowed to run as a meritocracy with the freedom to both explore and espouse disparate and unpopular ideas as well as essentially manage their own affairs.

Viewed from a distance and over the long term, American universities have held up their side of the partnership. Our best institutions of higher learning comprise three-quarters of the top twenty universities in the world, and the United States has three times more Nobel Prize winners than the United Kingdom, which ranks second. College graduates on average have twice the lifetime earnings of nongraduates, and for millions of Americans higher education has become a bridge to the middle class. Nevertheless, it is impossible to ignore the strains that have appeared in that partnership. Americans have become skeptical about whether college is worth it. The skepticism is strongest among young people. An NBC News/Wall Street Journal survey indicates that fewer than 40 percent of Americans ages eighteen to thirty-four now believe that college is worth the cost, down from almost 60 percent just four years earlier. This skepticism has surfaced at the same time that public institutions have sustained drastic reductions in public funding generally and federal support for research has been flat for much of the past decade. It is clear from our own experience while we were researching and writing this book that many Americans believe that the partnership is broken.

Our purpose in writing this book is to examine the elements of this critical partnership, unpack the competing narratives, and recommend a path that clearly articulates the obligations of all sides. The effort to rebuild the partnership will necessarily involve a conversation among parties inside and outside of the university, each with distinctly different points of view, but it is critical that we bridge those divides. Because higher education serves as an extraordinary engine of social mobility and a source of knowledge that critically shapes America’s economy and national interest, this conversation has the potential to define the future of the country.

Two competing viewpoints dominate the current discussion on how the partnership can best be reconstituted. One model—championed by many faculty and administrators—involves an unapologetic doubling down by the university on its traditional roles of teaching and research, free of influence from the nonacademic world. The narrative that underlies this idea is that the university produces knowledge and an educated citizenry, outcomes that are priceless and timeless, and that the introduction of systematic management techniques and a narrow focus on student success beyond the university is simply the corporatization of a sacred institution. This approach presumes that the resources that support the university, for example, tuition, government subsidy, and contributions from wealthy donors, should be provided with no strings attached. As far as the needs of students are concerned, those who advocate this model believe that a liberal education is a societal good and that preparation for employment after graduation is secondary.

Those who support this approach maintain that, for reasons that are largely political, government is no longer meeting its obligations to fund higher education adequately, thereby making it impossible for colleges and universities to fulfill their traditional role of educating students for useful and productive lives and generating knowledge that contributes to the public good.
The other approach—championed by many politicians, trustees, and alumni—borrows both language and techniques from the private sector and grafts them onto the organizational structure of the university. In this approach, the university has a transactional relationship with its students, who pay tuition in exchange for a good job and a good life; an employer-employee relationship with its faculty, who are paid to teach a prescribed number of students and, in some cases, compete for and secure a certain amount of grant funding; and a corporate relationship with its governing board. Student success in this model is measured by postgraduate employment rates and graduate starting salaries. New knowledge is valued for its potential to generate a profit for the inventor and the institution. The academic health center is viewed as a commercial enterprise, and the care provided there differs little from that offered by a private entity.

Supporters of this viewpoint argue that resistance to accountability has not served the university or the public well. Furthermore, colleges cost way too much, do not prepare students adequately for a career, and spend excessively on administration and amenities. Some go so far as to assert that higher education has become merely a form of political indoctrination at the taxpayer’s expense. And there is no denying that this sort of thinking has already resulted in dramatic reductions in public support and funding for higher education.

In reality, most take a position between these two extremes. Nevertheless, as this blunt summary suggests, battle lines are drawn and areas of potential compromise are hard to identify. And yet, the stakes are too high for us not to try to find them. We believe that such a pathway exists and that the starting point for negotiation lies in the partnership codified with the Morrill Act of 1862, in which the federal government provided the resources necessary to found institutions of higher learning in every state and the universities provided a public good and assumed a public duty. When the partnership works, higher education produces knowledge that is timeless and priceless, as well as habits of mind that prepare students to be independent, productive thinkers and responsible citizens in a democracy. Staff and faculty view their roles not simply as jobs but rather as near-sacred endeavors. Similarly, the loyalty that colleges and universities engender in their alumni is far greater than that produced by a mere business transaction. At the same time, universities earn the opportunity to operate by providing students with a pathway to economic prosperity and producing knowledge in the public interest.

We do not underestimate the difficulty of rebuilding the partnership we suggest. Academics bridle when administrators talk to them of the impact of their research and its usefulness to society, because they find such conversations demeaning. Trustees and alumni do not always accept the importance of shared governance, academic freedom, and, especially, tenure—all of which are at the foundation of American higher education. Reconciling the competing narratives will require interpersonal capital applied to networks inside and outside of the university. This can only happen following a conversation that celebrates the nuances that the challenges ahead.

In truth, successful administrators have been attempting to navigate this partnership for some time. Bart Giamatti, who served as president of Yale University (and later as commissioner of Major League Baseball), framed the challenge this way in 1988: “Being president of a university is no way for an adult to make a living,” he wrote. “Which is why so few adults actually attempt to do it. It is to hold a mid-nineteenth-century ecclesiastical position on top of a late-twentieth-century corporation.”

To rebuild the partnership, misconceptions such as the following must be tackled head on.

A college degree is not worth the cost. By any measure a college degree—even with debt—is “worth it” as long as you finish: those who do not complete their course of study are worse off than those who never try. So completion rate is just as important a metric for judging success in higher education as student debt.

Colleges and universities are flush with resources. Although seventy-five or so elite colleges and universities have large endowments and other income streams that make them more financially secure, most colleges are struggling financially. More than half of existing institutions have an unsustainable business model and will not survive without profound change. Even the elite schools are threatened by public policies aimed at taxing their endowments and cutting off the flow of “full-pay” foreign students so essential to their business model.

College is a residential experience for students between ages eighteen and twenty- two. In fact, 45 percent of college students are aged twenty-two and over, 28 percent have children, 62 percent work full or part time, and 54 percent live off campus. The actual face of American higher education is vastly different from the way it is perceived by the general public.

American colleges and universities are the front door to the middle class. This is no longer the case. American higher education is losing its claim as a facilitator of income mobility. Students from the top quartile of income are eight times more likely to get a degree than those from the bottom quartile.

The system of academic tenure is no way to run an institution. Academic tenure is in fact an economic boon to higher education. The fundamental business model that allows colleges and universities to survive would be undermined without the attractiveness of tenure to its most important members, because the cost savings from tenure at the beginning of academic careers far outweigh the costs at the end of academic careers.

Colleges and universities are not contributing enough to economic growth. The myth of the lone intellectual sitting in an ivory tower has been exploded by the remarkable economic engine that higher education and its related medical centers have become, and the economic influence of colleges and universities will only increase over time.

Colleges with high sticker prices are out of reach for most students. Many colleges with high tuition sticker prices have progressive financial aid programs that often make them cheaper for low-income students to attend than the public universities in their home states or private colleges with lower sticker prices and less financial aid.

Liberal arts degrees will not result in a good job. By any measure, the intellectual discipline and habits of mind at the heart of the liberal arts are exactly what is their careers. The challenge for the liberal arts is that a good liberal education will not by itself translate into a good job on graduation. The reality is more complex, and job readiness must become an integral part of American higher education at every level.

In the chapters that follow, we attempt to dispel these common misconceptions and take up the real challenges facing higher education. In the first three chapters, we lay out the strengths of the diverse set of institutions that constitute American higher education as well as the challenges they face. We also identify the institutional impediments to developing a strategy that attacks these challenges. Next, we discuss the unique roles in academia of students, faculty, and administration, none of which aligns with concepts from the business world such as customers, employees, or management. We then address the areas where universities can most effectively deliver on public expectations in a way that builds trust and a stronger partnership. Last, we frame what we hope will be a national conversation on rebuilding the partnership and suggest specific approaches that we believe will pave the way for this critical dialogue.

Throughout the book, we describe trends that apply to most any institution. Although it may seem that some apply only to elite institutions or to small colleges, we find that the larger trends apply to all. For example, even though well-endowed private schools have more money, they have to spend more to keep up with their competition. Small schools, for their part, still aspire to compete with schools that they see as aspirational peers; this keeps up a financial pressure that is remarkably similar to that felt at schools with more resources.

The university, and indeed everything embodied in the concept of higher learning, is one of civilization’s transcendent and permanent ideas. Universities are enduring and impactful. They change the lives of those who learn and teach inside their walls, and they will outlast most other institutions in our society. Students who are admitted to an institution of higher learning join a community of learners; they do not simply contract for a sequence of courses that provides a credential. Alumni wear the colors and sing the school songs for life because their alma mater has become part of their identity. Faculty work for lower compensation because they believe the curation and transmission of knowledge is a priceless and timeless undertaking of great importance. All of the interested parties have a stake in rebuilding the partnership that makes being part of an American university not just a profession or a business transaction but a higher calling.