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Michael MilkenThe Milken Institute

The Global Higher Education Marketplace

The importance the average Asian fam-ily places on education—based on the time and percentage of income they are willing to spend on it—far outweighs its importance in any other part of the world. The investments being poured

into research and higher education in China and the Greater Middle East dwarf those being

made elsewhere around the globe. In the United States, just 25 per-cent of postsecondary students are so-called traditional students, i.e., 18-22 year-olds enrolled in four-year residential colleges and uni-versities. Michael Milken, chairman of the Milken Institute and Knowl-edge Universe Education, consid-ers these factors and other aspects of the global higher education mar-ketplace and asks whether Ameri-can institutions want to play a sig-nificant role in the world of higher education. If so, he urges increasing involvement in Asia and the Middle East, as well as greater attention to nontraditional students, particular-ly via the deployment of technol-ogy to learning. Milken identifies human capital as the world’s most precious asset, and education as one of the best ways to build hu-man capital. He also points to ed-ucation as the primary solution to humanity’s biggest problems, rang-ing from poverty and disease to en-ergy and the environment, and to terrorism and war. Excerpts of his remarks are reprinted here.

A New Global PerspectiveI have spent much of my time during the last three years outside the United States, traveling in nearly two dozen countries. As we consider research and education around the globe, a few trends are worth highlighting:

Building Human CapitalThe major competition in this century will be the competition for human capital, especially those entrepreneurs, investors, scientists, art-ists and students who have the knowledge, skills, experience or potential to drive econom-ic growth and create jobs. Human capital today is mobile. The nationalistic feeling that some-one native to a country has to lead its large or-ganizations is gone; instead, companies look for talent and ability where ever they can find it: Eli Lilly’s CEO was born in Morocco; the CEO of Pearson, the leading British publish-ing company, was born in the United States; Eastman Kodak’s CEO was born in Spain; and PepsiCo’s CEO was born in India, to name a few. The recruiter for the two-million-square-foot biomedical sciences research complex, Biopolis, in Singapore, earns 20 times more than the head of the U.S. National Institutes of Health. His job is to convince the best and brightest scientists from around the world to do their research in Singapore. China’s Z-Park, a massive high-tech incubator for innovation in technology, business and financing in Beijing, just outside the gates to Tsinghua University, is home to some 18,000 companies, includ-ing more than 1,500 foreign firms. Z-Park offi-cials engage in aggressive recruitment efforts to lure the best innovators and researchers from around the world.

Key Notes

The major competition in this century will be the competition for human capital, especially those entrepreneurs, investors, scientists, artists and students who have the knowledge, skills, experience or potential to drive economic growth and create jobs.

It is wholly unrealistic to aim for a residential college experience for all learners—most of whom, as we know, are more than 25 years old and have jobs and/or families.

Vastly expanding educational op-portunity to reach the majority of learners is crucial because education is the primary means by which we can confront the massive and com-plicated problems facing humanity today. The current state of technol-ogy allows for such expansion if we are willing to pursue it with creative and open minds.

If only a quarter of our citizens earn a college degree, and half of the adult population in the United States has never taken a single college class, then most are falling behind. This group is vastly underserved by our nation’s traditional colleges and universities. We must deliver new means of knowledge access.

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Medical TourismSo-called medical tourism is booming as many countries acquire the ability to offer high-quality medical care at lower costs. In the United States, for example, the total cost for a heart-valve re-placement averages $200,000; in India, the average cost for the same procedure is $10,000. In 2007, nearly 200,000 foreign-ers traveled to India for medical procedures. At the same time, the world’s major multinational pharmaceutical companies are shifting that industry to Asia. And some of the world’s largest sovereign wealth funds (the Abu Dhabi Investment Authority, the Government of Singapore, the Kuwait Investment Author-ity, and others) are using their wealth to fund medical research, better medical treatment, and hospital facilities. Meanwhile, in the United States, federal funding of medical research has fallen 45% as a percentage of GDP over the last 30 years. Moreover, U.S. industries spend more today on tort litigation than on re-search and development.

U.S. Immigration PolicySince 9/11, barriers to foreign students hoping to study in the United States have been raised, as has competition from other countries to enroll foreign students. It has also be-come more difficult for foreign graduates of U.S. colleges and universities to stay in the United States and, in many instances, more appealing for them to either return home or work elsewhere. Venture capitalist John Doerr has said in regard to foreign graduates of U.S. institutions: “When you graduate with an advanced degree in the sciences or engineering, we then make you go home. We should be sta-pling a green card to your diploma.” I couldn’t agree more. We could transfer trillions of dollars to the United States in human capital if we would let the world’s best and brightest come to study and stay to live and work. Their contribu-tions as citizens would create millions of new jobs without threatening American workers.

Deploying TechnologyIn 1976, the IBM System 370 Model 168 computer cost $8 million and had 8 megabytes of storage. That’s $1 million per megabyte. In 2007, Apple introduced its iPod Classic, which cost $249 and had 120 gigabytes of storage. That’s <$0.002 per megabyte. In other words, the iPod has 15,000 times the storage capacity of IBM’s largest computer in 1976, and the cost per megabyte of the IBM was 500 million times that of the iPod. But speed is important too. In that regard, the United States ranks 25th in speed of broadband data. Japan, 17th on the list, can move data 10,000 times faster than we can in the United States.

There are two billion cell phones in use around the world

today—far more cell phones than wire lines. And the cost of calls has plummeted: In 1975, a phone call to India cost $10 per minute. Today, it costs about 4 cents per minute.

We are moving toward infinite digital storage and commu-nication anytime and anywhere. If we want it, the virtual class-room can be a reality: anyone speaking in nearly any class-room can be seen almost any place in the world by anyone else. Students in the United States, for example, could learn about the American Revolutionary War and have a discussion with a teacher and another class in England, simultaneously, for very little cost.

In the 21st century, universal access to knowledge will be-come a reality. It’s no coincidence that the Berlin Wall fell just as cheap copiers, faxes, and early e-mail systems came into widespread use. As the cost of internet publishing continues to dive toward zero, other walls will fall. Widely available ac-cess to democratic political representation, small-business fi-nancing, advanced medical treatment, specialized job training, and other benefits will spread around the world. Eventually, technological and social change will bring about philosophical change as the disintegration of international barriers allows us to better appreciate the interdependence of all humanity.

Educational institutions must adjust to this expanding use of technology. Traditional pedagogical models are being chal-lenged, yet education has been slow to adopt new technolo-gies and capabilities. In contrast, the deployment of technol-ogy in finance, medical research, and other industries is far advanced. Today we can do all our banking digitally, from home. There is little need for the huge bank buildings that we all used to visit regularly. In medicine, for another example, a highly trained scientist in the early 1990s could read 500 ge-nome letters in a day; today a $5,000 machine can read three billion genome letters in one day—that is, six million times more than the scientist. Today, just 25% of post-secondary students in the United States are so-called traditional students, i.e., 18-22 year-olds enrolled in four-year residential colleges and universities. The United States is not unique in this re-spect, and if our aim is to reach the most potential learners and build human capital, educational methods must evolve and take advantage of technological advances.

Human CapitalHuman capital is the most precious asset in the world. Humans create new technologies, drive productivity, and are the essence of such social capital as schools, police, civic and cultural insti-tutions, and religious organizations. A nation’s vitality depends on its human and social capital.

There are three key ways to build hu-man capital. First, we have to create an

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environment where people want to live. There is no better environment in the world than the United States in that peo-ple want to come here—particularly students who want to attend the world’s leading higher education institutions. Sec-ond, and very much related to the first, we have to improve peoples’ health and quality of life. Those are the goals of the Milken Family Foundation, which focuses on strengthening education and advancing medical research; the Milken Insti-tute, a nonpartisan economic think tank; and FasterCures, a nonprofit think tank focused on removing barriers to prog-ress against all life-threatening diseases.

Finally, to build human capital we need to improve and increase education and practical skills. Richard Smalley, win-ner of the Nobel Prize in Chemistry, surveyed thought leaders around the world and developed a list of “Humanities Top 10 Problems and Solutions for the Next 50 Years.” At the Milk-en Institute’s Global Conference, we brought together several Nobel Prize winners to delve further into these problems. First, we asked whether they agreed with the list. Then, with just some mild disagreements, the Nobel laureates ultimately determined that each issue was related to either energy or education. My conclusion is that education is the answer to all of humanity’s greatest problems. (See Table 1.)

Better education has to start early. James Heckman, Uni-versity of Chicago economist and 2000 Nobel Prize winner, found that “the rate of return to a dollar investment made while a person is young is higher than the rate of return to the same dollar made at a later age.” Figure 1 shows the declining rate of return on investments at the preschool level through adult job training.

Research by World Bank economists George Psacharopo-los and Harry Anthony Patrinos supports Heckman’s thesis and separates the benefits of education into private and social realms, as shown in Figure 2.

Clearly, the social benefits of an individual’s education are significant. Gary Becker, another University of Chicago econ-omist and 1992 Nobel Prize winner, posited that the U.S. bal-ance sheet shouldn’t simply be based on financial assets; rath-er, he estimated that our nation’s assets were just 26% finan-cial and that the remaining 74% comprised human capital.

The National Academies concurred with Becker’s thesis when it wrote in its 2005 report, Rising Above the Gathering

Storm: “The vitality of a nation is derived in large part from the productivity of well-trained people and the steady stream of scientific and technical innovations they produce.” This conclusion clearly reflects the National Academies’ focus on science and engineering; no doubt the National Academy of Arts and Sciences would speak to the value of citizens well-trained in the humanities as well.

Problem Noble Laureates’ Solution My Solution

Democracy Education Education

Disease Education Education

Education Education Education

Energy Energy Education

Environment Energy Education

Food Energy Education

Population Education Education

Poverty Education Education

Terrorism and War Education Education

Water Energy Education

Table 1. Humanity’s Top 10 Problems and Solutions for the Next 50 Years

Figure 2. Investments in Education

30%

20%

10%

Source: George Psacharopolos & Harry Anthony Patrinos, World Bank Working Paper 2881/2002.

Primary Secondary Higher

Private

Social

World Returns

Figure 1. Return on Human Capital Investment

Return

Source: James Heckman, University of Chicago.

Age

Opportunity Cost of Funds

Job Training

School

Preschool Programs

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For-Profit and Online EducationAs recently as 1950, there were three unskilled jobs for ev-ery skilled position. Today, jobs requiring skills are four times more prevalent than those for which manual labor suffices. Social mobility increasingly depends on access to higher ed-ucation. But if only a quarter of our citizens earn a college degree, and half of the adult population in the United States has never taken a single college class, then most are falling behind. This group is vastly underserved by our nation’s tra-ditional colleges and universities. We must deliver new means of knowledge access.

For-profit and online education companies are working to address the needs of this population by teaching them a skill, for example, so that they can get a better job or, perhaps, by retraining them so they can find a new job when their old one has disappeared. Full degree courses in a wide variety of fields are available online as well.

It is wholly unrealistic to aim for a residential college ex-perience for all learners—most of whom, as we know, are more than 25 years old and have jobs and/or families. The advantages of an online education compared to traditional colleges include:

•  Lower costs•  Personalization of curriculum•  Convenience and flexibility•  Readily updated course material•  Self-paced learning•  Participation in the global community

In light of these advantages, online postsecondary enroll-ment has risen dramatically since 2000, when fewer than 200,000 students were taking online courses. By 2008, that number topped 2 million and is projected to reach nearly 3.5 million by 2012.

Enrollment at for-profit postsecondary institutions—both on campus and online—has skyrocketed as well. For-profit schools offer unique advantages as well, including a focus on practical skills that lead to jobs and the flexibility to create new programs quickly. In 2007, enrollment in the four largest for-profit postsecondary education institutions was approximately 310,000 for the Apollo Group (which includes the University of Phoenix), nearly 275,000 for Laureate Education and 78,000 each for Career Education and Education Management.

Another for-profit company, Embanet, works directly with nonprofit colleges and universities to help move them online at no cost and minimal risk. The company markets the insti-tution and its particular degree program (e.g., nursing, MBA)

and students apply to the program through the institution’s regular admissions process. The courses are created by the in-stitution’s own professors, while teaching assistants can help teach and grade students, as usual. The institutions invest no money up front and receive a percentage of gross tuition rev-enues. This model offers the potential to help nonprofit, more traditional colleges and universities vastly expand their reach.

The advantages of for-profit and online education, as well as expansion of the traditional higher education model, make it possible for more people to change and improve their lives through education. It all adds up to more human capital and, likewise, a more vital society and nation. Indeed, the benefits of education are accruing around the globe: the five countries with the fastest-growing postsecondary enrollment are China, Vietnam, Romania, Greece and Saudi Arabia.

ConclusionAmerican colleges and universities are the best in the world. But the world is changing and leading institutions would do well to consider what role they want to play in the global world of higher education. Vastly expanding educational op-portunity to reach the majority of learners—who cannot af-ford the luxury of a residential educational experience much less pursue it full-time—is crucial because education is the primary means by which we can confront the massive and complicated problems facing humanity today. The current state of technology allows for such expansion if we are willing to pursue it with creative and open minds.

Stocks, bonds, roads, factories, equipment and other capi-tal goods comprise only a small fraction of our national bal-ance sheet. The vast majority of assets are in human capital—the skills and experience of people. We need to nurture those assets by giving every citizen access to lifelong learning. By in-vesting more of the nation’s abundant resources in education, we can help assure the future of our democracy.

rMichael Milken chairs Knowledge Universe Education, a for-profit company with worldwide operations in early childhood education and distance learning. He is chairman of the Milken Institute, a non-partisan, economic think tank, and co-founder of the Milken Family Foundation, which focuses on reform of primary and secondary education and recognizes outstanding educators. Milken is also chairman of FasterCures, which seeks improved efficiency in the medical-research process. More information can be obtained at www.mikemilken.com.